Anthony Hughes

Updated Mon, Jun 16, 2025, 8:37 AM5 min read

(Bloomberg) — Stocks of newly-public companies are surging in their first sessions at the fastest pace in three and a half years, enthralling traders and heating up the market for US first-time share sales.

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Drone maker Airo Group Holdings Inc. ended Friday with a gain of 140%, a day after raising $60 million in its initial public offering, and coming barely a week after stablecoin issuer Circle Internet Group Inc. surged 168.5% immediately following its $1.2 billion IPO.

With conservative cable channel Newsmax Inc.’s wild 735% opening gain in March, following its $75 million offering, three companies raising at least $50 million on US exchanges this year have more than doubled on their first trading day, according to data compiled by Bloomberg. That’s the most since nine US-listed debutantes managed the feat in 2021’s IPO boom.

These spectacles may be thrilling to watch, but history shows extreme day-one pops rarely reward investors in the long run.

Professional traders and retail investors often drive a first-day rally, snapping up the stock as early as they can and riding the momentum. Most of these buyers weren’t able to get their hands on the shares during the IPO itself, however. That’s because companies prefer to allocate shares sold in IPOs to mutual funds that base their investment strategies on a fundamental view of a company’s prospects, and that, notionally at least, have committed to remain long-term backers.

Not surprisingly, outsized first-day performances fueled by momentum and retail buying offer a poor guide to a company’s long-term prospects.

Between 1980 and 2023, there were 316 companies listing on US exchanges whose shares doubled in their first day of trading, excluding those with offer prices below $5 per share, units and American depositary receipts, according to data compiled by Jay Ritter, professor of finance at the University of Florida.

Nearly 90% of these IPOs had negative three-year buy-and-hold returns versus the price at which they closed their opening session, and the average loss was a painful 46%, Ritter’s data showed.

A cluster of first-day doubles usually coincides with market peaks like the Internet bubble of 1999 and 2000, when more than 100 companies that doubled in price, though most faded into obscurity, Ritter said.

Firms likely to pop include fast-growing companies with retail-investor enthusiasm, Ritter said, citing Newsmax as a recent example.