UK investors can now apply for the largest US flotations. But history suggests that buying after trading begins will do no better than matching the market.
Picture two UK investors who bought SpaceX shares this summer.
One person applied in June and secured shares at the £135 initial public offering (IPO) price. The other missed the allocation and bought at £160.95 when trading ended on the first day. By the end of October, the first investor was roughly even in dollar terms, while the second was down about 16%. The difference came from just one day of trading.
Anthropic may be next. Its filing, published on 26 October, states that the offering includes a public offer in the UK. Before applying, check where the deal's money goes - and who receives it.
Among companies with annual sales above £1 billion, adjusted for inflation, the average first-day share-price gain was 9.8%.
Anyone who bought at the end of the first day missed that initial gain. During the following three years, the shares roughly matched the US stock market but lagged by about two percentage points on average. Smaller companies performed much worse, trailing it by 34 points.
For the biggest names, most of the upside came on the first day and went to investors who bought at the offering price. Afterward, buyers generally earned about what the broader market returned, but with the added risk of holding one company.
That is the first calculation to make. If you receive fewer shares than requested and consider buying more once trading begins, check the live price against the offer price. The difference represents what later buyers are paying above the price available to the initial buyers; Ritter's data on large companies offers no reason to expect that premium to produce additional returns.
Why do you get less of the good ones?
Shares at the offer price are now available, but only in limited amounts. SpaceX's IPO was opened to UK investors under the FCA's new public offer platform rules, allowing companies to sell shares to private investors here without a UK prospectus. Demand reached almost £1 billion, so applications were filled in full only up to 2,013. Larger applications received fewer shares.
Jersey Mike's, the US sandwich chain, took the same route when it floated in New York in July. Its limit was higher, with applications filled in full up to about 3,190. The shares finished their first day six% below the offer price and stood about a fifth below it by the end of October. In other words, the deal available in greater quantity was the one that dropped on day one.
Economists know this as the winner's curse. Kevin Rock explained how it works in 1986: investors with better information chase appealing offerings and avoid the poor ones, leaving everyone else - including you - underallocated in the good deals but fully allocated in the bad. Rock's conclusion was blunt: companies must sell new shares at a discount if they want ordinary investors to keep applying.
Two deals are no proof, but Rock's idea has faced a real test. Researchers examined Israeli flotations from the early 1990s, when every applicant's allocation was reduced by the same proportion and the results were made public. Applicants received larger allocations in offerings that later proved overpriced. Although the average flotation initially returned 12%, ordinary applicants lost 1% after accounting for the shares they actually received.
Who comes next, and what will it cost?
Bloomberg reports that Anthropic is working with RetailBook, another platform operator, on a plan to offer UK orders through the usual investment platforms. The company may also reserve 15-20% of its shares for private investors worldwide. Nothing has been finalized, and no price has been set.
The same company can be valued very differently over time. Anne Boden, Starling's founder, sold her remaining shares at a valuation of 1.7 billion, Sky News reported in October - less than half the 4 billion the bank was reportedly seeking last year. Monzo is also discussing a stake sale with private equity firms, Sky reported, after takeover talks with Brazil's Nubank fell apart. For now, neither British neobank appears close to a stock-market listing.
Shein makes the point plainly. The fast-fashion retailer was reportedly valued at about £100 billion in a private 2022 deal, yet it listed in Hong Kong on 1 September at roughly a quarter of that figure. Investors placed orders worth 5.6 times the shares available, but only about half received an allocation. The stock finished its first day just below the offer price, then ended October about a quarter lower. Limited allocations showed strong demand - not a sound investment.
What should you check before applying?
Set a firm maximum before submitting an application. Each platform has set its own minimum in the offers so far, but any allocation should be treated as a small, speculative holding. Apply only for an amount you would be comfortable owning in full; with deals other investors pass over, you may receive exactly what you requested. Check the platform's currency-conversion fee and confirm whether the shares can be held in your ISA or SIPP. An accepted application is binding. The offer terms may allow withdrawal if significant new information emerges during the offer, though that is usually the only exception. Also read the prospectus's lock-up section, which explains when insiders may sell. SpaceX releases insider holdings in stages, while Elon Musk's shares remain locked up until 12 June 2027.The verdict
In a mega-IPO, investors who secure shares at the offer price hold the edge. Strong demand usually means receiving fewer shares, so anyone seeking a stake should keep the position small and view it as a bet.
Paying on day one has generally delivered the market's return, less a small amount, while adding the risk of one company. A low-cost index fund gives you the market's return without that extra risk.
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