SpaceX, OpenAI, Anthropic face a post-IPO test from Wall Street

00:00 Jared

SpaceX, OpenAI, Anthropic, they have the kind of stories that investors love.

00:06 Jared

Big markets, big technology, big revenue potential.

00:11 Jared

And the history of IPO data says there’s still one old school test that matters. Can the company actually make money?

00:20 Jared

That is, can they turn a profit?

00:22 Jared

So let’s start with a filter in this chart here, which tracks unprofitable IPOs in green versus profitable IPOs in blue.

00:32 Jared

On IPO day, money-losing companies actually get the bigger pop. That’s the green bar on the left here, up 26% on average.

00:43 Jared

Profitable IPOs in blue pop less on day one, about half that or 13%.

00:49 Jared

But now look at the three-year returns. That flips completely. Money-losing IPOs were basically flat to slightly down here after three years, while profitable IPOs were up more than 30%.

01:07 Jared

So the market may reward the story on day one, but over time, it rewards proof.

01:14 Jared

Now, SpaceX does have some things that are important going for it: revenue. And that’s what’s in this next chart here.

01:23 Jared

Here we’re splitting IPOs by pre-IPO sales or revenue, and companies below $100 million in sales are in green. They got the bigger opening pop. That’s to the left.

01:36 Jared

But companies above 100 million in revenue did much better over the next three years. You can see that blue bar there. Uh that’s a low one on the left, but over on the right here after three years is up 36%.

01:52 Jared

That matters because SpaceX is not some tiny concept stock. It has real businesses. It launches, Starlink, government contracts and defense demand.

02:05 Jared

So revenue gives investors something to underwrite, but sales alone is not going to get you to the finish line, which brings us to our third chart, splitting IPOs into tech versus non-tech.

02:20 Jared

Here we can see that tech IPOs beat non-tech IPOs both on day one and over three years. So we got tech in green there.

02:30 Jared

That’s good news for the SpaceX, OpenAI and Anthropic class. But this is the key point. Tech is not magic.

02:39 Jared

The label gets attention, the numbers decide what happens after that first trade. So the takeaway is simple. Sales and tech help a mega IPO get noticed. Profits are what are going to determine whether it has a staying power after that confetti clears.

02:59 Jared

Back to you, Josh.

03:00 Josh

All right, thank you, Jared.