AWM Insights Financial and Investment News | The IPO Trap: Why Chasing the Pop Is Just Gambling in Disguise

In this episode of AWM Insights, Chief Investment Officer Justin Dyer and Portfolio Manager Mena Hanna take a close look at IPOs, breaking down what an initial public offering truly means and how it fits—or fails to fit—into a disciplined, generational wealth strategy. They dig into headline-makers like SpaceX and discuss the realities behind IPO “pops,” market timing, and the long-term results data shows for investors. For families thinking beyond the next big story, Justin and Mena share expert perspectives on where real opportunities live and why chasing IPO hype rarely leads to lasting wealth. If you want to understand the true game plan for building and protecting multi-generational prosperity, this episode is essential listening.

Chapters
(00:00) Understanding IPOs and Public Markets
(01:32) How IPOs Work and Access Points
(04:40) IPO Day Pops and Lockup Periods
(07:31) Challenges of Wealth Building via IPOs
(09:36) Systematic Investing in Private and Public Markets
(11:00) Early-Stage Access versus Pre-IPO Hype
(13:00) Portfolio Strategy and Avoiding Forced Buying

Connect with Us
• Call or text us: 626-862-0355
• Website: https://www.athletefamilyoffice.com/
• YouTube: https://www.youtube.com/channel/UCc1NxpK21N1vKWEExC45YEA
• LinkedIn: https://www.linkedin.com/company/awmcapital/
• Instagram: https://www.instagram.com/awmcapital/
• X: https://twitter.com/awmcapital
• Facebook: https://www.facebook.com/awmcapital/

Creators and Guests

Host

Justin Dyer

Chief Investment Officer and Chief Operating Officer at AWM Capital

Host

Mena Hanna

Senior Investment Analyst at AWM Capital

What is AWM Insights Financial and Investment News?

A bite sized discussion on timely financial news and investment topics, to help you maximize your net worth and wealth for the next generation with Justin Dyer and Mena Hanna of AWM Capital.

Intro Hook: If you're paying attention
to any of the news, it's hard to avoid

the fact that SpaceX is going public
here in the not too distant future.

Figma was worth like four times more
two to three days after the IPO.

They IPO'd at thirty-three bucks.

They moved all the way up to a
hundred and forty bucks a share.

Facebook was down thirty
percent in the first six months.

Uber was down thirty percent.

So that initial pop that you might have
experienced disappeared and then some.

Everything we're talking about here
is generally short-term capital gains,

which are taxed at the highest tax level,
and that just really destroys wealth.

You wanna buy it early, you wanna
buy when it's hard to access,

when it's at significantly lower
valuations and ride that up.

That is taking the casino's seat and
not being in the gambler seat like those

people buying the IPO/pre-IPO shares.

We do believe in the private markets.

We also believe in the public markets.

How does it fit within
this whole equation?

Justin: Hey, everybody.

Welcome back to another
episode of AWM Insights.

It's your host, Justin Dyer,
Chief Investment Officer here

at AWM, joined as always,

uh,

by Mina Hanna, our portfolio
manager here at AWM.

And today's topic,

uh, we're gonna dive into are
IPOs or initial public offerings.

We'll go into exactly

what that means, but we thought it's
a relevant topic to, to dive into.

We've got a few questions
here in- internally, and, um,

if you're paying attention to any of
the news, it's probably hard to avoid

the fact that SpaceX,

um, is going public here in
the not-too-distant future.

And there's a

ton of other,

kind of rumors and rumblings
of a, a few other big names,

uh, that are going public.

They're not the only ones.

There's more and more
companies that are, that are,

uh, taking

this option this route.

We've, we've seen

We-- There's-- this this, action

has continued.

I will say this is not something
that just is specific to SpaceX.

It-- The volume of companies that
have been going public has dropped

over the last few years, and we're
seeing this pickup and these,

uh, these big headline drivers
are, are certainly helping that.

But more specifically, we wanna
kinda unpack how we at AWM

think about IPOs specifically,

uh, and, and how,

if at all, they fit in supporting the
multi-generational hundred-year family.

so without further ado, we're
gonna jump right into it.

Mina, as always, um, let's just start

with the basics, like IPOs,

what are they?

Talk a

a little

bit about the SpaceX IPO

as insofar

as what we know, right?

We know basically what we're-- what
everyone else is reading about.

And then you

can even take it to say
like, how, how are the...

how-- What are the

two ways in which

people can invest in IPOs?

Keeping it really basic,

there's probably a lot more than the,
the two that we're gonna talk about,

but again, just for sake of
conversation and, uh, uh, education,

the two ways that, that we can

access

Mena Hanna: in which
people can invest in IPOs?

Keeping it really

basic, there's probably a lot more
than the, the two that we're gonna talk

about, but again, just for sake of
conversation and, uh, uh, education,

the two ways that, that we can access.

it.

Yeah.

Um, so an IPO, initial public
offering, is exactly that.

It sounds very simple on paper,
but there's a lot of mechanisms.

You can sort of simply think about
it as you're a private company.

AWM is a private company.

There's a lot of other...

Justin: control.

Make sure we talk-- the market, right?

What i- what is the market in this case?

Mena Hanna: The

market a private company.

SpaceX is going to go through a process
to release shares into the market

and give up some control.

Make sure we talk, the market, right?

what what is the market in this case?

The

market is the public market.

So right now, all of SpaceX's
shares, they're all private.

They're all-

managed

in a different way.

There's different regulatory also,

um, scrutiny And

this

listing, which should ideally make the
transacting of shares for SpaceX easier.

That's typically why companies IPO.

That's the benefit here

is you get liquidity

That

ends

up happening in the public market.

Justin: And

the public

markets can be generally

one of two,

uh marketplaces let's

let's call it

So New York Stock
Exchange being one and the

Nasdaq

being another one.

I believe SpaceX

is listing on the Nasdaq.

So just

bring some, some names and
terminology that I think a lot

people are m- uh, more familiar with
than just like the broad public market.

Mena Hanna: Yeah.

Those are the venues.

you have this private company.

It kind of actually does even
after IPO-ing remain private in

some, in some degree because you
have something called a share lockup.

So what SpaceX would do is maybe
they would issue 20 to 25% of their

shares to actually hit the market.

Those become public.

Now, all of the private
investors are just kind

of stuck for the next six months.

They're not able to trade their shares,

buy, sell, do anything.

I guess you can buy more
in the public markets,

and

you have to wait until
six months for all of

those shares to actually

unlock

And

I guess the, the markets in general
just think that six months it takes

time for that company to stabilize, for
investors to have a better read, and

then people aren't just ideally going to

dump their entire
allocation into the markets.

Now,

you you said two things.

Uh, you said there's two
ways of getting access

You can access

the shares pre-IPO, so you can
do that in the private markets.

Sometimes there's also opportunities
to buy pre-IPO shares through the banks

that are running this public process,

or you can buy these shares

on the

day of actual listing, which

that is definitely not recommended.

Justin: And

then setting us up for the next
question I'm gonna ask you.

So if you're doing pre-IPO,
what does that actually-

mean?

Well, let's a-again, use
SpaceX SpaceX as an example.

Generally speaking, you're buying it
at what the published listing price

is.

So uh, I

believe SpaceX, at least

the, the, um,

news

coverage is saying it's gonna be
a one point seven trillion dollar

valuation, one point seven eight,

um,

somewhere in that range.

So if you're participating pre-IPO,
you're basically locking in that price.

And then

the hope is that there's a little
bit of a pop on, on day one,

as opposed to if you're
buying it on day one,

Hey if you're

getting it right on, right at, at,

you know, minute one, okay, maybe you're
getting it at close to the same price

or maybe

uh, two hours in, you're
getting it at a, at

a, at a pop.

So,

um, like I said, setting up
the next question I'm gonna

ask, like what happens day one?

But arguably more importantly t-
'cause to your point, there's always

this lockup period, et cetera.

Like what happens

long term

to these-

Mena Hanna: these- Yeah.

pop scenarios?

What, what happens and this is

human psychology, there is

a pop on day one.

So you might think like,
"What am I missing here?

Justin: Not guaranteed, but it seems

to happen.

Mena Hanna: Typical.

Yeah.

It actually, it happens
more often than not that

there is a pop on day one for,
for a lot of these positions.

Now, we've seen this with generational
companies, Facebook, Uber.

Over the next six months as

a pre-IPO investor, you're sort

of stuck.

You, you have a pop, you have a nice
little green arrow on, on your dashboard

that says, "Oh, your position's worth

10, 15, 20% more."

Figma is actually a great example.

Figma was worth like four times more,

uh, two to

three days after the IPO.

They IPO'd at 33 bucks.

They moved all

the way up to 140 bucks a share.

That looks great on paper, but over the
next six months, Figma systematically

sold off and there's, there's a whole

host of reasons,

but

we kinda see that across the board.

Facebook was down 30%
in the first six months.

Uber was down 30%.

So that

initial pop that you might have
experienced disappeared and then

some, and you're in the red.

And

in in, the case of Figma, the
shares are trading at $25 when

all of, all of the shares actually unlock.

you might have thought
that you were, you know,

being smart, getting ahead of the market.

You also probably had a, a little
bit of a pat on the back that, that

was a, a false positive through
just that first initial week pop.

Um, and

then when it actually came time for you to

to be able to sell the shares,
you were-- you're pretty far in

the red compared to the market

which was, which was up pretty

Justin: Yeah.

okay,

Awesome.

Super helpful.

and I, I, just wanna add some clarity or

or our

take to a couple of those points.

So one, from a...

Let's say you're participating
in the pre-IPO, generally you're

locked

up-

Yeah

... just

as the private

market investors

and okay,

let's call it six months.

Data shows six

months after IPOs, you're
not in, in a good position.

So there's no systematic way of,

uh, of

generating wealth, building wealth,

in that,

that

sense.

Um, then you could also
say, "Well, okay, let's buy

it on day one," and

then you're getting into

the

Difficulty

of timing markets.

All right.

Yeah.

on...

often than not,

there's a little bit of a pop.

When does That pop end?

That piece of it becomes
really hard to determine.

So when do you buy it,

on day one matters, then you

go to when do you sell, and that is

predicting

the future and, and trying
to time the markets.

And we know that

that

just an incredibly

difficult t- thing

to do.

Uh, and we're not even getting
into the tax side of things.

Everything we're talking about
here is generally short-term

capital gains, which are

at the highest

tax, um, tax bracket.

Taxed at the highest tax level,

Uh, and that

just really destroys, destroys wealth.

So we always try to
think about, especially--

Well, we try to think about
everything as a systematic way of

building wealth, and generating

wealth, right?

Play the casino, play the...

Look at the data, look at the odds in our

favor,

and, and

tilt the,

tilt the odds in our favor Uh, and we just
don't see any evidence of that within the

IPO, um,

topic

in general, whether it's
the pre-IPO side of things

day

one,

uh,

cetera

bringing that

to a conclusion, I do want to talk

about

how we think about investing kind of

more, more holistically, more macro.

We do believe in the- private markets.

We've talked about that.

We also believe in the public markets.

We've talked about that plenty,
but how does it fit within

this whole, whole equation?

But uh, you also have a one

last

point.

Mena Hanna: No, no, no.

Uh, I was actually

gonna talk about the casino and
the gambler, so this is a Perfect.

Justin: Awesome.

Yeah.

for it.

let me

set

you

up.

Wi- within the private

markets,

we, again, like I just said,

we, invest there.

We think there's,

there's

a lot of strong data.

There's a-- there's

wealth that can be generated
there, especially for that

100-year multi-generational

family

that

can

systematically

deploy capital

into

the private markets.

and then on

the other side

of that spectrum

the

public

markets.

Incredible, uh,

ecosystem

of, of

higher confidence, lower
returns, but higher confidence

those returns that really can
support the 100-year family as well.

So just unpack

exactly

what I'm

saying there.

Yeah.

Mena Hanna: Yeah.

On the public market side, it
pays to be an investor early on

and to access these companies at

significantly earlier
stages than the IPO or, or

even the round before the IPO.

I feel like we also see that quite a
bit where it's like, Oh, we're raising

Series E capital," which is really late.

Um, they raised

E number

of, of rounds, and

yeah, you should get in
because we're gonna IPO in the

next three, six, 12 months.

Ideally

you're

investing at seed stage, at pre-seed,
at Series A, and you're building this

ownership and establishing this basis when

the company isn't worth a billion dollars.

So you're investing early on.

Now, the risk there is a lot of these
companies end up failing, but the winners

actually more than make up for the losers.

you end up having a significantly higher
expected return and, and yeah, uh,

It's

it's the better time to get in.

It's sort of like buying
tickets to an event with a

capacity of 100 versus 100,000.

You are going to get a better experience

in that smaller event.

That's, that's harder
to access, and that is

that is the secret sauce right there.

It's not everyone can do it.

Not everyone can get in.

So of course, your experience
is going to be better.

When you think about the pre-IPO stage,

everyone is selling these shares.

I can...

You can just Google buy SpaceX IPO
shares, pre-IPO shares right now, and

you can just do it.

Now,

I was, I was doing the math while we

were

talking.

Buyer

beware on

that

one.

Yeah, Buyer beware.

You know,

you, you, mentioned 1.7,

1.8

trillion.

Some of these shares, the
effective valuation is

2.1

trillion.

Justin: So

Because of all the

fees and

Yeah.

all the craziness

Mena Hanna: Yeah.

So you're getting, you're
getting a worse deal and, and

that's sort of what happens.

You, You, wanna buy early, you
wanna buy when it's hard to access,

when it's at significantly lower
valuations and, and ride that up.

That is

taking

the casino's seat and not being in
the gambler seat like those people

buying the IPO/pre-IPO shares.

Now, in the public markets,
it, it changes a bit, but it's

relatively the same dynamics.

SpaceX is gonna IPO.

SpaceX is gonna be introduced into
a lot of these indices that we

see, the, the NASDAQ, the S&P 500.

That's gonna happen

Everyone typically does that at

concentrated periods of time.

IPO day is a great

example.

People just rush in, and that's why we see
the pop in, in price That's inefficient.

Indices do the same thing.

When these positions, when these
stocks are being added to an index,

added to the S&P 500 and

S&P Global kicks another company out,

all of these index funds end up
buying SpaceX at one, one time.

Um, it's actually like a
15-minute window of time where

billions and

billions

dollars

are just going in one
direction, which is never great.

And what you're, what you're left
with is you're left with an entry

price that's just suboptimal.

in the public markets, what we like
to do and how we invest capital is,

all right, you know that the indexes
is going to actually add this.

Why don't you just buy a
little bit ahead of time

in between

sort

of the IPO craze and the index craze?

That makes all the sense in the world
and and it generates real dollars.

Not doing that, that's when you're
in, in the seat of the gambler.

And

if you go back to the early
'90s, the, the difference in

performance is pretty substantial.

It's roughly 2% when you factor in

the IPO

the IPO pop-up,

uh, the, the trend down in performance.

It's a 2% deviation in performance
between these IPOs over the

first 12 months

and the public market.

you're kinda systematically
losing money, which is

what gambling is.

Yes.

Yeah,

Justin: losing money,
which is what gambling is.

Yeah, ex-exactly.

for, those of you who didn't know.

Um, well, cool.

I think that's a, a great summary.

Um, co-covered...

I mean, a focused topic, but in a way,
a, a broad range of topics as well.

So kind of

just-

just reviewing

everything for,

for

listeners.

IPOs,

the data really just doesn't

support this systematically.

You can buy

pre-IPO shares.

You're

locked

Generally

speaking,

when those lockups come

to fruition

or,

the, the, the, lockups expire prices
are lower than the initial offering

price,

which is the price you probably got it at.

Um, so again, not a

systematic way of building wealth, taxes

aside,

which

even makes the,

the

picture look

worse.

Same thing with

the,

the IPO

um, participation

day

one.

You're

introducing timing, you're
introducing short-term gains.

Super difficult and again, a
non-non-systematic way of, of

building

wealth and,

and

really,

you know,

you're just gambling in

that sense.

And

we never

wanna think about

investing as gambling.

Then

extending that beyond, we have
how we think about private

market

investing,

which

IPOs is a

incredibly,

important, uh, step

on the journey

private

market investing.

But we just wanna

participate

very

early.

the

earliest stages,

These companies grow, go

public

acquired.

But

in this

example,

we're

talking

about

companies going public,

it's

super

important,

unlocks

liquidity.

But the

valuation,

um, difference

there,

whatever happens on day one
or whatever happens between

day one and the, the lockup

expiring

is just not as significant really
to, to us when we're thinking

about investing that way.

And then on the pure public side

of,

of things, you talked about
indexes and the inefficiency and

forced buying and forced selling.

Never wanna be in that position.

We want to be

thoughtful.

We want to take the best of indexes, be

low cost,

but

then

also invest

in a

way

that

just

doesn't,

um,

just doesn't uh doesn't

doesn't bring frictions ...to

the portfolio, which end up costing

money.

So, um, hopefully, this whole
conversation was super helpful.

Um,

there's

a lot within

this,

if you

have any

additional follow-up questions about
what's going on with respect to IPOs

just anything

kind of more

broadly

with this conversation,

Mena Hanna: shoot

a text.

six two six eight six two three five five.

Justin: And hopefully, this was a
helpful conversation in general.

Uh, but until next time,

own your wealth, make
an impact, and always be

Mena Hanna: a pro.