What History Says About Buying Broken IPOs

The article examines Space Exploration Technologies Corp (SPCX) after its IPO has broken below the offering price, framing it as a “broken IPO.” It argues that the $135 IPO price is a key psychological level, and falling below it may create selling pressure as investors and institutions who bought near the IPO price look to exit on rebounds. Using a historical study of IPOs that first rallied at least 25% above their IPO price and then fell back below it within six months, the article finds that these names tend to be highly volatile and generally weak over the following six months. Average near-term returns can be positive, but the median six-month return was negative and fewer than a third beat the S&P 500. The analysis suggests SPCX may remain risky, with the S&P 500 offering better risk-adjusted performance, though some broken IPOs eventually stage very large recoveries.