Quick Answer: Investing in an IPO can offer potential benefits, including the chance to invest in a company as it becomes publicly traded, detailed SEC disclosure through the company’s S-1, the ability to trade on public exchanges, exposure to new sectors, and the potential for long term growth. These benefits are not guaranteed. Newly listed stocks are often more volatile than established ones, many IPOs have underperformed the broader market over time [4], and you can lose some or all of your investment. Some investors choose to limit any single IPO to a small part of their overall portfolio.

Alinea Invest offers fractional shares from $1, recurring investing, and Allie, an AI assistant that provides educational research and feedback. Allie does not provide investment advice or recommendations.

Key Takeaways

• IPO activity has been high in 2026. According to Renaissance Capital, 83 US IPOs raised roughly $114.7 billion in the first half of 2026 (35 IPOs raising $9.9 billion in the first quarter and 48 raising $104.8 billion in the second) [1][2]. Past IPO activity does not indicate how any IPO will perform.
• Access to newly public companies. An IPO is when a private company’s shares first become available to the public. Most retail investors buy after trading begins, often at a price above the offering price [3].
• Transparency. Going public requires a company to publish audited financials and risk factors in its S-1, giving investors research material that private companies do not share. SEC disclosure does not mean a company is a sound investment, and the SEC does not endorse or approve securities.
• Public trading. Once listed, shares generally trade on an exchange on market days, unlike many private holdings. Newly listed stocks can have wide price swings, and liquidity is not guaranteed.
• Gains are possible, but not guaranteed. According to University of Florida professor Jay Ritter, US IPOs averaged a 19.0% first day gain from 1980 to 2025 [3], but IPOs from 2012 to 2024 trailed the broader US market by an average of 25.5 percentage points over the three years after their first closing price [4]. Retail investors often cannot buy at the offering price. Past performance does not guarantee future results.
• Smaller positions may help manage risk. Some investors limit any single IPO to a small share of their portfolio. Fractional shares and recurring investing let investors choose smaller amounts. Position sizing does not protect against loss.

What it means to invest in an IPO: An initial public offering, or IPO, is the first time a private company sells shares to the public. Investing in an IPO means buying those shares, either at the offering price through a participating brokerage before trading begins, or on the open market once the stock is listed. Alinea does not offer IPO allocations at the offering price. Through Alinea, you can buy shares once a stock is listed and available for trading.

Why IPOs Are Attracting Investors in 2026

IPO activity has picked up in 2026. According to Renaissance Capital, 35 US IPOs raised $9.9 billion in the first quarter of 2026 [1], and 48 IPOs raised $104.8 billion in the second quarter [2]. The largest was SpaceX, which raised about $75 billion when it listed on the Nasdaq on June 12, 2026 [2][9].

IPO activity does not indicate the quality of any company or how a stock will perform. Understanding what IPOs offer, and their risks, can help investors evaluate each listing on its own.

The 6 Potential Benefits of Investing in IPOs

1. Access to newly public companies

An IPO is when a private company’s shares first become available to the public. Before a listing, ownership is typically limited to founders, employees, and venture or private equity investors. Companies now stay private longer than they once did, so much of their early growth may happen before everyday investors can invest. According to Ritter, the median company was 12 years old at its IPO in 2025, compared with 9 years across 1980 to 2025 [6]. A company’s growth to date does not indicate future results.

2. Public disclosure

To list in the US, a company files an S-1 registration statement with the SEC containing audited financials, revenue detail, risk factors, and an explanation of how the business makes money. This gives investors primary source material to research, and the company must keep reporting each quarter. SEC disclosure does not mean a company is a sound investment.

3. Public trading

Once a company completes its IPO, its shares trade on an exchange, so investors can generally buy or sell on days the market is open, unlike many private holdings that are hard to sell. Trading in newly listed stocks can be volatile, prices can move quickly, and liquidity is not guaranteed. Insider lock-up periods can also affect prices (see The Trade-Offs below).

4. Exposure to new sectors and themes

IPOs can give investors exposure to newer businesses. In 2026, listings have included companies in AI, aerospace, and biotech [10]. A position in one newly public company adds exposure to that company and its sector, but it is not diversification. Diversification does not ensure a profit or protect against loss.

5. Potential for long term growth

Some IPOs have grown significantly over time, but many have not. According to Ritter, US IPOs averaged a 19.0% first day gain from 1980 to 2025 [3], while IPOs from 2012 to 2024 trailed the broader US market by an average of 25.5 percentage points over the following three years [4]. Results vary widely by company, and you can lose some or all of your investment. Past performance does not guarantee future results.

6. Retail access

According to Reuters, individual investors typically receive only 5% to 10% of shares in public offerings [7], and allocation is never guaranteed. Some recent offerings have expanded retail allocation through participating brokerages. Alinea does not offer IPO allocations at the offering price. Owners of whole shares generally have voting rights; fractional shares may not carry voting rights. See your account agreement.

The Trade-Offs

Every potential benefit above comes paired with a risk. Newly listed stocks are more volatile than established ones because they have little or no trading history. First day gains often reverse in the following months. Lock-up periods, which the SEC says most commonly last 180 days [8], restrict insider selling at first, and prices can move sharply when they expire and more shares reach the market. Many newly public companies are not yet profitable: 53% of 2025 US IPOs reported negative earnings in the 12 months before listing [5]. You can lose some or all of your investment. Investors should weigh these risks against their own goals, time horizon, and risk tolerance.

What Investors Often Consider Before Investing in an IPO

• Read the S-1. It describes what the company does, how it makes money, and its risk factors.
• Position size. Some investors limit any single IPO to a small share of their portfolio. Position sizing does not protect against loss.
• Timing. Some investors build a position over time by investing a fixed amount on a schedule (dollar cost averaging). It does not assure a profit or protect against loss in declining markets.
• Lock-up expirations. Lock-up expirations can affect prices.
• The company. IPOs differ widely, and results depend on the company, not the category.

Investing in Newly Public Companies on Alinea

Alinea Invest, Inc. offers a mobile investing app. Investment advisory services are provided by Alinea Advisory Services LLC, an SEC-registered investment adviser and a wholly owned subsidiary of Alinea Invest, Inc. SEC registration does not imply a certain level of skill or training. Once a company is publicly traded and available on Alinea, you can buy it in a self-directed brokerage account the same way as other listed US stocks. Alinea does not provide advice or recommendations about individual stocks.

• Fractional shares from $1. Fractional shares let you invest a smaller dollar amount in a stock instead of buying a full share. Not all securities are available for fractional trading, and fractional shares may not carry voting rights.
• Allie. Allie, Alinea’s AI assistant, can provide plain-language educational research and feedback on companies and market news. At your request, Allie can also start a buy or sell, and you confirm every transaction before it runs. Allie does not provide investment advice or recommendations, and its responses may be inaccurate or incomplete.
• Recurring investing. You can set a fixed amount to invest on a schedule, an approach known as dollar cost averaging. Dollar cost averaging does not assure a profit or protect against loss in declining markets.

Brokerage accounts are held at DriveWealth LLC, member FINRA/SIPC, which is not affiliated with Alinea. SIPC protects securities customers of its members up to $500,000 (including $250,000 for claims for cash) if the brokerage firm fails financially. It does not protect against a decline in the market value of your securities. More information: www.sipc.org.

Illustrative example: Consider an investor who wants exposure to a newly listed company. Instead of buying a full share on the first day of trading, they invest $25 per week through a recurring plan, keeping the position under 5% of their portfolio. If the stock’s price swings sharply in its first months, their purchases happen at different prices, but the position can still lose value, and dollar cost averaging does not assure a profit or protect against loss. This example is illustrative only, is not a recommendation, does not reflect actual client results, and is not a prediction of future results.

Key Terms Glossary

• IPO (initial public offering). The first sale of a private company’s shares to the public.
• S-1. The registration document a company files with the SEC before a US IPO, containing its financials and risk factors.
• First-day pop. A sharp rise in a stock’s price on its first day of trading.
• Listing gain. The difference between the IPO offering price and the price once the stock trades publicly.
• Lock-up period. A set window after the IPO, most commonly 180 days according to the SEC, during which insiders cannot sell their shares.
• Allocation. The number of IPO shares a brokerage actually grants you, which can be fewer than requested.
• Underwriter. The investment bank that manages the IPO and distributes shares.
• Fractional share. A portion of a single share, allowing investment of small dollar amounts.
• Dollar cost averaging. Investing a fixed amount on a regular schedule regardless of price. It does not assure a profit or protect against loss in declining markets.
• Secondary market. The open market where shares trade after the IPO.

Frequently Asked Questions

What are the main benefits of investing in IPOs?

The potential benefits include access to newly public companies, SEC-mandated disclosure, public trading, exposure to new sectors, and potential long term growth. IPOs also carry higher volatility and the risk of loss, and none of the benefits are guaranteed.

Are IPOs a good investment?

Whether an IPO is suitable depends on your goals, time horizon, risk tolerance, and the specific company. IPOs generally carry higher risk than established stocks. According to Ritter, US IPOs averaged a 19.0% first day gain from 1980 to 2025 [3], but IPOs from 2012 to 2024 trailed the broader US market by an average of 25.5 percentage points over the following three years [4]. Past performance does not guarantee future results.

Do IPO stocks usually go up on the first day?

On average, US IPOs have risen on their first day (19.0% from 1980 to 2025, according to Ritter [3]), but averages hide wide variation. Some IPOs fall on day one, and first day gains often fade in the following months. Retail investors often cannot buy at the offering price. A first day gain does not indicate long term value.

What are the risks of investing in IPOs?

Risks include higher volatility than established stocks, limited trading history, possible price declines when lock-up periods expire, and the fact that many newly public companies are not yet profitable. You can lose some or all of your investment. Diversification and smaller position sizes may help manage risk but do not protect against loss.

Can retail investors actually get shares at the IPO price?

Sometimes. According to Reuters, individual investors typically receive only 5% to 10% of shares in public offerings [7], and allocation is never guaranteed. Most retail investors buy after the stock begins trading. Alinea does not offer IPO allocations at the offering price.

Is it better to buy an IPO on day one or wait?

There is no right answer for every investor. Prices on the first day can be volatile, and demand can inflate the price. Some investors prefer to wait and research the company. Neither approach assures a profit or protects against loss.

How much of my portfolio should go into a single IPO?

There is no set rule. The right amount depends on your goals, time horizon, and risk tolerance. Alinea does not provide personalized recommendations on how much to invest in any single security, and any single stock can lose all of its value.

Can I invest in newly public companies with Alinea?

Once a company is listed and available on Alinea, you can buy it like other US listed stocks, starting with fractional shares from $1 where available. Allie can provide educational research and feedback on a company’s business and financials but does not provide investment advice or recommendations. Recurring investing is also available. Availability varies by security.

Disclosure

Advisory services are provided by Alinea Advisory Services LLC, an SEC-registered investment adviser and a wholly owned subsidiary of Alinea Invest, Inc. SEC registration does not imply a certain level of skill or training. Brokerage and custody services are provided by DriveWealth LLC, an unaffiliated registered broker-dealer and member of FINRA/SIPC.

This content is for informational purposes only and is not an offer, solicitation, or recommendation to buy or sell any security, including any security mentioned. All investing involves risk, including loss of principal. Past performance does not guarantee future results. Third-party statistics are from the sources and as of the dates listed under Sources, have not been independently verified by Alinea, and different providers use different definitions and may report different totals. Alinea is not affiliated with these sources, and their inclusion is not an endorsement. Allie is educational only, does not provide investment advice, and can make mistakes. Individual stocks are traded in self-directed brokerage accounts, and Alinea does not provide advice or recommendations about them. Alinea charges a subscription fee for its advisory services; see Item 5 of Form ADV Part 2A.

See our Form ADV Part 2A, Wrap Program Brochure, and Form CRS at www.alinea-invest.com/legal.

Sources

[1] Renaissance Capital, US IPO Market 1Q 2026 Quarterly Review, April 1, 2026 (renaissancecapital.com).

[2] Renaissance Capital, US IPO Market 2Q 2026 Quarterly Review (updated), July 1, 2026 (renaissancecapital.com). Renaissance counts IPOs and direct listings with a market cap of at least $50 million and excludes closed-end funds, units, and SPACs. Other data providers report different totals.

[3] Jay R. Ritter, University of Florida, Initial Public Offerings: Updated Statistics, Table 1 (updated July 13, 2026). Equal-weighted average return from offer price to first-day close for 9,345 US operating company IPOs from 1980 to 2025; excludes SPACs, ADRs, and IPOs priced below $5.

[4] Ritter, same publication, Table 11a (updated May 18, 2026). 1,645 US operating company IPOs from 2012 to 2024; average three-year buy-and-hold return from the first closing price, less the return on the Morningstar US Total Market Index, through December 2025.

[5] Ritter, same publication, Table 9 (updated December 30, 2025). Share of 2025 US operating company IPOs with negative earnings per share over the prior 12 months.

[6] Ritter, same publication, Table 4 (updated April 24, 2026). Median age of companies at IPO.

[7] Reuters, “OpenAI will reserve portion of IPO shares for retail investors, CFO tells CNBC,” April 8, 2026.

[8] U.S. Securities and Exchange Commission, Investor.gov, “Initial Public Offerings: Lockup Agreements.”

[9] SpaceX, Form 424B4 prospectus, filed June 12, 2026 (sec.gov/edgar).

[10] Nasdaq, “Nasdaq Delivers the Strongest First Half in U.S. Exchange History as Public Markets Momentum Builds,” press release, July 1, 2026.

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