Stock markets are riding on an unstoppable buying momentum. Traders are building euphoric conditions ahead of two or three initial public offerings. They are SpaceX, OpenAI, and possibly Anthropic.
Are those IPOs a buy? Investors are not waiting to ask. Instead, they bought up shares of companies that held OpenAI privately. For example, Softbank (SFTBY) has a ~ 13% stake in OpenAI. Alphabet (GOOG) (GOOGL) holds a 6.1% stake in SpaceX. It invested $900 million in the firm in 2015.
Why Wait?
Investors should look at Cerebras Systems (CBRS) as an example of what might happen days after the IPO. CBRS stock peaked at $386.34. Compare that to the $256.78 close last week, a drop of 33.5%.
The IPO creates excess demand for a shortage of stocks. Anyone who buys the stock with a market order (instead of a limit order) would pay any price. Exchange-traded funds are also forced to buy any stock that the S&P 500 (IVV) adds to the index. SPY and IVV ETFs would automatically hold those IPOs.
Patient investors might consider waiting at least five days after the IPO. Afterwards, they may buy either the S&P 500 index ETF or those stocks. Waiting a few days would let the market adjust to the potential flood of selling volume that follows. Traders typically book profits shortly after the listing.
