Introduction: IPOs, an Attractive but Risky Market
The initial public offering (IPO) is often seen as a promising investment opportunity, offering privileged access to the explosive growth of young innovative companies. However, quantitative analysis of IPO performance reveals a more nuanced picture, with an average performance often below that of the overall market. This article provides a rigorous analysis of IPO performance in France and internationally, based on recent numerical data as well as emblematic case studies, to enlighten French investors on the risks and opportunities involved.
Average 1-Year IPO Performance: a Negative Return of -30%
According to a study published by the Banque de France in 2023, the average performance of IPOs over a one-year post-IPO horizon is negative, around -30% compared to their offering price (Banque de France, 2023). This figure is corroborated by a Bloomberg analysis of a sample of 500 global IPOs between 2018 and 2023, which indicates an average underperformance of -28% at one year compared to the MSCI World index.
This underperformance can be explained by several factors: initial overvaluation of shares at the IPO, high volatility, and pressure from institutional investors who often seek to quickly exit their positions.
Criterion
Average 1-Year IPO Performance
1-Year MSCI World Performance
Source
2018-2023
-30%
+5%
Banque de France, Bloomberg
Notable Exceptions: Google and Airbnb, Rare Successes
Despite this general trend, some IPOs have experienced exceptional trajectories. Google (Alphabet) in 2004 and Airbnb in 2020 are among the few cases where investors realized substantial medium-term gains.
Google: Google's IPO in August 2004 was followed by a cumulative performance of +900% over 10 years (Bloomberg, 2024).
Airbnb: Since its IPO in December 2020, Airbnb's share price has increased by +120% by the end of 2023, despite volatility linked to the pandemic (Bloomberg, 2024).
These successes remain exceptions, often linked to disruptive business models and dominant market positions.
The Lock-Up Period: A Key Volatility Factor
The lock-up period is a contractual clause prohibiting initial shareholders (founders, private investors) from selling their shares for a period generally between 90 and 180 days after the IPO. This period is crucial because it holds back a potentially significant supply of shares on the market, limiting downward pressure on the price.
At the end of the lock-up, strong volatility is often observed, related to the release of shares and profit-taking by initial investors. According to a study by the AMF, about 65% of French IPOs experience a significant correction within 30 days following the end of the lock-up (AMF, 2023).
Optimal Buying Window: Wait 6 to 12 Months Post-IPO
Academic research and market analyses converge on a strategy of waiting before purchasing shares from IPOs. A study by INSEE (2022) on 300 European IPOs recommends waiting between 6 and 12 months post-IPO to benefit from a more realistic valuation and reduced volatility.
This approach allows investors to:
Avoid the initial overvaluation often practiced at the offering.
Observe the market’s reaction to the publication of the first quarterly results.
Reduce the risk related to the end of the lock-up period.
Recent Case Studies: IPOs of Doctolib and Vestiaire Collective
Two recent IPOs in France illustrate the dynamics discussed:
These examples confirm the general trend of IPO underperformance in the current economic environment, marked by rising interest rates and increased risk aversion (Banque de France, 2024).
Practical Recommendations for French Investors
Based on the data and analyses, here are precise recommendations:
Avoid buying at the offering price: favor entering the market at least 6 months after the IPO to limit overvaluation risks.
Analyze company quality: prioritize companies with solid fundamentals, profitable growth, and sustainable competitive advantages.
Monitor the end of the lock-up period: anticipate volatility and adjust positions accordingly.
Diversify: do not concentrate an excessive portion of your portfolio in IPOs, given their high-risk profile.
Conclusion: Opportunity or Trap?
Investing in IPOs can offer opportunities for strong valuation gains, especially in innovative or fast-growing sectors. However, the average 1-year IPO performance is significantly below the market, with an average decline of -30%, and volatility exacerbated by the lock-up period and initial overvaluation.
Only a few emblematic exceptions, such as Google or Airbnb, have demonstrated exceptional potential, but they remain marginal. For French investors, the most prudent strategy is to wait for an optimal buying window of 6 to 12 months after the IPO, relying on rigorous fundamental analysis and diversifying their exposure.
Verdict: IPOs represent more of a trap than an immediate opportunity for retail investors. A delayed and selective approach is essential to hope for a positive return.
