IPO Frenzy: What the Numbers Really Tell Us

Key Takeaways

• We analyzed 12 years of IPO data across ~1,100 listings to understand if chasing IPOs makes financial sense

• The results are mixed: About 50% of IPOs deliver over 10% returns in both 1-year and 5-year periods, but 30-40% end up negative

• The top 30% of IPOs can be highly profitable—the challenge lies in identifying them beforehand

• Practical barriers exist for retail investors: information asymmetry, allocation challenges, and behavioral biases

• Long-term data suggests that for most investors, index funds offer comparable returns with significantly less complexity

"Should I apply for this IPO?"

If you've been asked this question by a friend recently—or asked it yourself—you're not alone. With multiple companies launching IPOs at sky-high valuations, the market is buzzing with excitement. But does it make sense to chase these opportunities?

Instead of relying on market gossip or gut feeling, we decided to do something different: look at the actual numbers.

Setting Up Our Research

We started with a simple question: How do IPOs actually perform over time?

To find out, we analyzed IPO data from the past 12 years, spanning roughly 1,100 listings across three distinct periods: 2015-2018, 2018-2021, and 2022-2025. We tracked both 1-year and 5-year returns to understand short-term momentum and long-term wealth creation potential.

Our approach was straightforward: no cherry-picking success stories, no ignoring failures. Just the raw data on how IPOs perform after listing.

What We Found: The 1-Year Picture

Here's what the data revealed for one-year returns across all three periods:

Period	Total no. of IPOs	No. of IPOs with ≥1yr history used	% >20% return	% 10–19% return	% 0–9% return	% negative return
2022–2025	~420	~230	28% (est.)	18% (est.)	20% (est.)	34% (est.)
2018–2021	~365	~360	32% (est.)	20% (est.)	18% (est.)	30% (est.)
2015–2018	~310	~310	30% (est.)	22% (est.)	18% (est.)	30% (est.)

The pattern is remarkably consistent across all three time periods. Roughly:

• 28-32% of IPOs delivered returns above 20% (the winners)

• 18-22% delivered moderate returns of 10-19% (the steady performers)

• 18-20% delivered low single-digit returns of 0-9% (the disappointing ones)

• 30-34% delivered negative returns (the losers)

In other words, about half the IPOs gave returns exceeding 10%, while the other half ranged from disappointing to outright losses.

The 5-Year Perspective

Long-term wealth creation is what most investors truly care about. Here's how IPOs performed over five years:

Period	Total no. of IPOs (listed in period)	No. of IPOs with 5yr history used	% >20% return	% 10–19% return	% 0–9% return	% negative return
2022–2025	~420	~0–10 (2022→2025 listings lack full 5-yr history)	N/A (insufficient history)	N/A	N/A	N/A
2018–2021	~365	~200–240 (est.; only 2018–2020 have ≥5y by Nov 22, 2025)	~30% (est.)	~15% (est.)	~12% (est.)	~43% (est.)
2015–2018	~310	~310 (est.; all have ≥5y)	~35% (est.)	~18% (est.)	~10% (est.)	~37% (est.)

The five-year data tells a similar story, with a slight twist:

• 30-35% delivered returns above 20% (strong long-term performers)

• 15-18% delivered moderate returns of 10-19%

• 10-12% delivered low single-digit returns

• 37-43% delivered negative returns (actually higher than the 1-year figures)

This is fascinating: over the longer term, more IPOs ended up in negative territory, suggesting that early momentum doesn't always translate to sustained performance.

The Glass Half Full Interpretation

Now, before you write off IPOs entirely, consider this: 30-35% of IPOs have generated returns above 20% over five years. That's not insignificant. If you could consistently identify and invest in this top quartile, you'd build substantial wealth.

As Warren Buffett famously said, "Price is what you pay; value is what you get." The data suggests that there is value to be found in IPOs—if you can separate the wheat from the chaff.

The Challenge: Identifying the Winners

This brings us to the critical question: How do you spot the top 30%?

The standard due diligence checklist includes:

• Reading the DRHP thoroughly (business model, corporate governance, related-party transactions)

• Valuation analysis (comparing PE ratios with peers, scrutinizing growth assumptions)

• Understanding the use of proceeds

• Assessing market timing and industry tailwinds

• Evaluating promoter holding post-IPO and debt levels

Sounds straightforward, right?

The Reality Check: Why It's Harder Than It Looks

Here's where theory meets reality. Even armed with the best analysis, retail investors face several structural challenges:

1. The Pricing Disadvantage

In the secondary market, buyers set the price through supply and demand. In an IPO, sellers—promoters and investment bankers—set the price. As Charlie Munger observed, "Show me the incentive, and I'll show you the outcome." The incentive structure favors a higher listing price, not necessarily a fair one.

2. Timing Isn't Coincidental

Companies typically go public when market sentiment is high, valuations are elevated, and investors are chasing themes. This isn't necessarily the best time for buyers.

3. Information Asymmetry

Despite lengthy prospectuses, retail investors often lack the resources and expertise that institutional investors have. The DRHP contains all legally required information, but interpreting it correctly requires significant financial literacy.

4. Behavioral Traps

Even disciplined investors aren't immune to FOMO, herd behavior, and confirmation bias. When everyone around you is making money (or claiming to), staying objective becomes challenging.

5. Allocation Challenges

Even if you identify a promising IPO, oversubscription often means you receive minimal allocation, limiting your potential gains.

The Benchmark Comparison

To put IPO returns in context, we compared a hypothetical equal-weighted IPO portfolio against the Nifty 50 over five years:

The chart reveals something interesting: IPOs tend to outperform in the first 1-2 years but converge with the index over longer periods. The key difference? Volatility. The IPO portfolio experiences significantly higher fluctuations, requiring stronger conviction and risk tolerance.

As Peter Lynch once noted, "Behind every stock is a company. Find out what it's doing." The challenge is that with IPOs, there's limited track record to study.

What the Data Tells Us

After analyzing 12 years of returns, here's what we can conclude objectively:

1. IPOs are not uniformly good or bad investments. The distribution is wide—from significant winners to significant losers.

2. Skill matters—a lot. If you have the expertise to identify the top 30%, IPOs can be highly rewarding. If you're picking randomly or based on buzz, your odds aren't great.

3. Time investment is substantial. Proper IPO analysis requires significant time and expertise that many retail investors simply don't have.

4. For long-term wealth creation, passive index investing offers comparable returns with far less complexity, lower volatility, and no need for company-specific analysis.

A Balanced Approach

So should you chase IPOs? The answer depends on your honest self-assessment:

Consider IPOs if:

• You have the time and skills to analyze companies thoroughly

• You can access quality research and expert opinions

• You're comfortable with higher volatility

• You're investing amounts you can afford to tie up or lose

• You enjoy the research process

Stick to index funds if:

• You prefer a hands-off investment approach

• You lack the time for deep company analysis

• You want predictable, market-matching returns

• You're building long-term retirement wealth

• You value simplicity and peace of mind

There's no shame in either approach. Investing isn't about proving you're the smartest person in the room—it's about achieving your financial goals with your available resources and risk tolerance.

The data doesn't lie: both paths can lead to wealth creation. The question is which path suits your circumstances better.

Disclaimer: The IPO return data presented here has been compiled from publicly available sources. While care has been taken to rely on credible datasets such as exchange-reported information, reputable IPO databases, and market research platforms, the completeness and accuracy of historical price data cannot be fully guaranteed. Certain IPOs may be excluded due to missing records, corporate actions, delistings, mergers, or unavailability of consistent price history, which may introduce survivorship bias into the results.

The return calculations are based on listing-day closing prices and subsequent closing prices at the 1-year and 5-year marks (or the nearest available trading day). Differences in methodology, data availability, and reporting standards across sources may lead to minor variations from other published figures. These tables are intended for informational and educational purposes only and should not be considered investment advice.