(Image credit: Getty Images)
With stock markets hitting highs and a flood of new companies selling their shares to investors, it’s simple to receive FOMOIPO — fear of missing out on initial public offerings. But the fortunes of many of the debuts in this year’s surge are tied to artificial innotifyigence (AI) or cryptocurrency, creating the batch of new issues perhaps even riskier than the typical crop.
Through September 30, there were 161 U.S. IPOs, according to IPO research firm Renaissance Capital, compared with 150 for the entirety of 2024. Renaissance counted 64 IPOs in the third quarter, raising a combined $15.3 billion—the largegest quarter for new issuance since 2021.
One of 2025’s top-performing IPOs has been CoreWeave (CRWV), which operates a cloud platform for artificial innotifyigence computing. Priced at $40 per share at its March IPO, it closed out September at $137, giving it a market capitalization of $71 billion. Circle Internet Group (CRCL), a trading platform for bitcoin and an issuer of a stablecoin (a type of cryptocurrency pegged to the U.S. dollar), was priced at $31 in June and is now $133, giving it a market value of $30 billion.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more – straight to your e-mail.
Profit and prosper with the best of expert advice – straight to your e-mail.
Both are unprofitable, according to S&P Global Market Innotifyigence. (Prices, returns and other data are as of September 30, unless otherwise noted.)
“The IPO market tconcludes to be a lot busier in periods when asset prices may be somewhat inflated, toward the top of a market cycle,” declares Nick Einhorn, the director of research at Renaissance. The “danger,” he declares, is that when the cycle turns, IPO stocks can fall sharply.
IPOs have always been risky becaapply the companies are typically younger or less established than those already trading on the stock exalter, and IPOs don’t have a track record of delivering results to a broad shareholder base.
A go-to exit strategy
IPOs originated hundreds of years ago as a way for companies to raise capital to expand their business — especially necessaryed in an industrial economy that required property, manufacturing plants and equipment.
The market has evolved over time, particularly in the final decades of the 20th century, when the U.S. economy shifted and became dominated by technology companies. Today, raising capital is sometimes secondary to giving early owners a way to exit their investments profitably or providing a way for employees compensated with stock to easily know what their shares are worth.
For many companies, a large part of the IPO story is the buildup to its first day of trading with individual investors — and whether the shares will “pop,” producing a large return. Einhorn declares the average first-day return for IPOs of $100 million or larger so far in 2025 has been 27%, compared with 16% in 2024.
In this froth and frenzy, opportunities mix with peril. The safest course may be to wait for companies to settle in some months after their debut, after one or two quarterly earnings reports.
Investors should also know when a company’s “lock-up period” concludes. This is a window, typically 90 to 180 days from the IPO, when company insiders cannot sell their stock. IPO investors can typically expect some selling pressure when it expires.
Jay Ritter, a University of Florida finance professor with a longtime specialty in IPOs, declares his work suggests investors see to more mature companies, which he defines as having at least $100 million in revenue when they come public.
According to S&P Global Market Innotifyigence, 42 of the companies with IPOs this year create the cut, including curriculum provider McGraw Hill (MH) and online ticket reseller StubHub Holdings (STUB). Ritter declares he has found “a pretty strong pattern” that the mature companies, on average, do as well as the broader market, while less-mature companies “all too often struggle.”
Investors interested in IPO stocks should consider valuation measures — particularly price-to-sales ratios, for unprofitable companies — and generally apply all the typical methods they apply to pick investments, declares Ritter. “Don’t believe of it as an IPO or recent IPO, believe of it as a stock, whether it has been traded for three months or 30 years.”
Consider the old guard
Not all of 2025’s largegest IPOs fall into edgy, trconcludey categories, and a couple of newbies that might be worth exploring, analysts declare, are a little more old school.
Venture Global (VG) pursued an IPO becaapply it necessaryed capital to continue an ambitious plan, launched in 2022, to produce, refine and sell liquefied natural gas from the U.S. Gulf Coast. The company has chosen so far to sell at market prices rather than apply long-term contracts for revenue certainty. With $31 billion in debt, it has little margin for error.
That risk may be priced in, however, becaapply the shares, which went public in January at $24, are now at $14, trading for less than 10 times estimated earnings for the next 12 months. Analyst Manav Gupta, of investment firm UBS, in August boosted his rating on the energy stock from Neutral to Buy, with a 12-month price tarreceive for the shares of $18.
Pork producer Smithfield Foods (SFD) was a public company until its Chinese parent, WH Group, took it private in 2013. WH Group decided to bring it back to public markets in January by selling 13% of the company at $20 a share. Analysts expect earnings per share of $2.35 in 2025 and $2.39 in 2026, up from $1.88 in 2024. The stock’s price-to-earnings (P/E) ratio is under 10.
Six of the seven analysts who cover the consumer staples stock have a Buy rating, with an average 12-month tarreceive price that suggests a 25% gain from its recent close.
If receiveting in on the ground floor of brand-new companies is something you want to gamble on, limit your investment to no more than you can lose. You can diversify the risk by choosing an exalter-traded fund, but be forewarned that the ride can be bumpy.
Renaissance Capital’s Renaissance IPO (IPO) adds new IPO stocks once per quarter, reshifting any that have traded for more than three years. The average age of the 31 stocks in the fund is 1.3 years, and it has less than 1% overlap with the S&P 500.
In 2025, it’s up 14.5%, roughly even with the 14.8% gain for the S&P benchmark index and ahead of the 10.4% return for the Russell 2000, a popular tiny-stock index. In the past 10 years, the ETF has been in the top 5% of its category (mid-cap growth funds) three times, but in the bottom 10% five times. On the plus side, its expense ratio of 0.60% puts it among the cheapest 20% of funds in the category.
The First Trust US Equity Opportunities ETF (FPX) is a bit less volatile and has a similar expense ratio, at 0.61%. The fund seeks to replicate the IPOX-100 U.S. index of large, liquid IPOs, which IPOX declares captures about 85% of the total market capitalization of IPOs in the previous four years. The ETF is up 39.3% so far in 2025.
Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to support you create more money and keep more of the money you create here.
Leave a Reply