Initial IPO returns in the United States fluctuated between 2005 and 2023. Throughout the period considered, 2020 was the best year for first-day gains, amounting to 23 percent. In 2023, the average first-day gain after an IPO in the U.S. was zero percent, as IPOs maintained their offering prices on their first day of trading.

More than half of IPOs in the United States in 2023 generated negative first day returns, up from 39.5 percent of IPOs in the previous year. This represents one of the highest share of negative returns throughout the period considered, second only to that recorded in 2008.

In 2020, the popularity of special purpose acquisition companies (SPACs) exploded in the United States and the average initial return was also higher than in recent years. Initial return is the percentage value difference between the IPO offer price and the first-day market price. The mean initial return was 1.2 percent in 2023, up from 0.1 percent in the previous year.

This statistic shows the breakdown of closing performance of initial public offerings (IPOs) on their first day in Singapore in 2020. In 2020, eight IPOs were able to close the first day above their initial IPO price.

At almost 22 billion U.S. dollars in deal size, Alibaba’s IPO in 2014, underwritten by Credit Suisse, was the largest initial public offering (IPO) in the United States, followed by Visa's 2008 IPO, underwritten by JP Morgan. How big is Alibaba? The Alibaba Group Holding, a hugely profitable Chinese company operating in the e-commerce sector, debuted on the New York Stock Exchange. This was a critical IPO because it gave private investors a chance to reach into the Chinese market. The company sells trillions of yuan in merchandise each year. For a company that was already handling volume on that magnitude at the time of its IPO, a skilled underwriter like Credit Suisse was crucial for and IPO. Why does an IPO need an underwriter? An IPO is a complicated process. Even a larger firm like Alibaba does not have specialists in the kind of regulations placed on the process, so they are willing to pay significant underwriter fees to ensure a successful IPO. This risk can pay off with high returns if conditions are correct, but a significant number of IPOs also have negative first day returns.

The share of initial public offerings (IPOs) in the United States closing above IPO price on the first day of trading fluctuated somewhat between 2008 and 2021. In 2021, one third of IPOs in the U.S. fell on day one of trading. The remaining 66.4 percent of IPOs closed above IPO price on debut. Based on the information regarding this time period, an average of around 31.4 percent of IPOs fell on the first day of trading in the United States between 2008 and 2021.

In 2020, the underwriting fees of companies undergoing initial public offering (IPO) process, where the deal was valued between 500 million and one billion U.S. dollars, amounted to 5.4 percent of gross proceeds from the offering. This means that companies with an IPO of that size paid their underwriters a fee of 5.4 percent of the total IPO. These underwriters are usually large financial corporations, such as investment banks.

What is an IPO?

An IPO represents the decision of a private company to seek public funding. This opens the company to increased regulation, but the largest IPOs worldwide generate billions of dollars in investment. This money comes from newly issued stock, the sale of which becomes open to the public at the time of the IPO, the initial offering of that stock to the public.

IPOs in the United States

There are a large number of IPOs in the United States each year. In many cases, the IPO is a chance for the company to have a positive return and an increase in capital with which it can grow its operations. But a portion of IPO deals shows negative first day returns.