Warren Buffett didn’t like IPOs and only bought a couple in his 60 years in the industry. There’s a reason.
He is one of the world’s most successful and closely followed investors. He’s watched every major IPO of the last seven decades from the front row: Uber, Google, Facebook, Amazon, all of it. He could have bought any of them when they first issued shares but he passed. He waited.
So What’s an IPO, Exactly?
IPO stands for Initial Public Offering. It’s the moment a private company opens its shares to the public and anyone can buy a piece of the business.
Before that moment, ownership was tightly held by the founders, early employees, and sometimes, venture capital firms. Essentially, the people started it, took a real risk, and had been waiting sometime for the chance to cash out.
The IPO is that chance.
The IPO price is set by the company and its analysts; it’s a guess of the maximum price they think people will buy the shares at. After the IPO, it just becomes a stock available on the different stock exchanges at whatever price the market thinks it’s worth, which is not the price the IPO was set at.
The key thing to know is that there are two markets: Primary and Secondary
| IPO Market (Primary Market) | Secondary Market |
|---|---|
| A company sells its shares to investors for the first time. | Investors buy and sell shares that have already been issued. |
| The money raised goes directly to the company. | The money goes between investors; the company does not receive it. |
| Investors purchase shares at the offering price set during the IPO process. | Prices change continuously based on supply and demand. |
| The goal is usually to raise capital for business expansion, debt repayment, or other corporate purposes. | The goal is to provide liquidity, allowing investors to buy or sell their investments. |
Think of it like buying a car:
- Buying a brand-new car from the dealership is similar to participating in an IPO:
The dealership decides the price and receives the money. - Buying a used car from another owner is similar to the secondary market:
The transaction is between the individual who owns the car and another individual who wants to buy it. The buyer and seller determine the price and the dealership is not involved, nor receives any money from this sale.
So why does everyone act like the IPO launch is the only day that matters?
The Hype Is Part of the Product
In the months before a company goes public, investment bankers, PR firms, and lawyers spend enormous energy building excitement. There are roadshows. Analyst reports. Carefully crafted narratives about disruption and explosive growth. The company’s story gets polished to a mirror shine.
“Beware the investment activity that produces applause;
Warrent Buffett
the great moves are usually treated by yawns.”
IPOs are the loudest, most applauded events in investing and that alone should give you pause.
By the time the stock hits the market, you’re not looking at the raw company. You’re looking at the company at peak marketing … and buying something at peak marketing is rarely how you get a good deal.
Why the Deck Is Stacked Against You
When a company goes public, the IPO price is set by investment banks. Those banks have relationships with big institutional investors: pension funds, hedge funds, large asset managers. Those institutions get first access to shares at the offering price, as a reward for their business relationships.
By the time a regular investor, like yourself, can buy in, the IPO stock has already opened on the exchange, often at a significant premium to that original price. So the “IPO price” you hear about on the news? That’s not what you’re paying.
The Alarm Clock on IPOs
There’s a detail buried in almost every IPO that most retail investors never hear about: the lock-up period.
When a company goes public, insiders, founders, executives, early investors, are legally prohibited from selling their shares for 90 to 180 days. It’s a rule designed to prevent them from dumping stock the moment the doors open.
But here’s what happens when that clock runs out.
Many of them sell and the stock frequently drops when they do, sometimes sharply. The people who built the company, who know it better than anyone, who have been waiting years for this moment, finally get the chance to cash out … and a meaningful number of them take it.
Some IPO examples
You don’t have to take anyone’s word for this. The cautionary tales are everywhere.
Uber went public in 2019 with enormous fanfare. The stock dropped on its first day and spent years underwater. Peloton (remember when everyone had a Peloton?) ended its first day of trading 11% below its IPO price. Rivian, the EV vehicle, went public in late 2021 at a valuation bigger than Ford and GM combined, despite having delivered almost no vehicles. It surged in the hype days just after its IPO and currently trades around $18 versus its $78 IPO price.
Below is a chart of some of the biggest IPOs in recent history that you may have heard about:
| Company | IPO Share Price | 3 months after | 6 months after | 1 year after | Today (June 2026) |
|---|---|---|---|---|---|
| Instacart Sept 19, 2023 | $30 | $24 | $34 | $41 | $41 |
| Rivian Automotive Nov 9, 2021 | $78 | $60 | $32 | $32 | $18 |
| Uber May 10, 2019 | $45 | $40 | $27 | $32 | $71 |
| Peloton Sept 26, 2019 | $29 | $27 | $27 | $97 | $5 |
| Meta (Facebook) May 18, 2012 | $38 | $19 | $21 | $26 | $593 |
| Visa Mar 25, 2008 | $44 | $75 | $50 | $55 | $324 |
| Google (Alphabet) Aug 19, 2004 | $85 | $150 | $175 | $290 | $366 |
Sources: Macrotrends, Yahoo Finance, CNBC, NBC News, Bloomberg. Historical prices approximate — adjusted for splits where applicable. Google prices shown pre-2014 split adjusted. Today’s prices as of June 2026.
When is the right time to buy?
Buffett’s approach isn’t to avoid great companies. It’s to wait until he can evaluate them properly.
A newly public company is an unknown quantity in ways that matter. You don’t have years of public financial statements to review. You don’t know how management will handle the pressure of quarterly earnings calls and public scrutiny. You don’t know what happens when the lock-up expires and insiders start selling.
Wait 12 to 18 months and you have all of that. You have real data instead of a prospectus written by people being paid to sell you on the story. You have a sense of whether the business is actually performing the way management promised it would.
And more often than not, you have a lower price.
Facebook’s IPO in 2012 was a mess. Technical glitches, an overhyped valuation, a stock that went nowhere for over a year. The investors who waited, did their homework, and bought when the dust had settled? They did extraordinarily well. The ones who bought on day one, caught up in the moment? Far less so.
A Word on FOMO (fear of missing out)
When a stock jumps 40% on its first day of trading, it feels like you missed something. The financial media will make sure you feel that way. That’s their job.
But that jump is usually just the hype machine working as designed, the market pricing in excitement and not necessarily reality. And excitement, as an investment thesis, has a pretty poor track record.
Some of the best financial decisions you’ll ever make are the ones you don’t make. The IPO you sat out. The hot tip you ignored.
That’s not passivity, that’s discipline. There’s a difference.
The Bottom Line
IPOs are exciting. Genuinely, there’s something compelling about getting in on something new, something buzzy, something everyone’s talking about.
But excitement is not a strategy.
Thinking about how an investment fits into your broader financial picture? That’s exactly the kind of conversation we should be having. Reach out anytime.
