The allure of an Initial Public Offering (IPO) is hard to resist. For companies, it’s a chance to raise capital and achieve public recognition. For investors, it represents a rare opportunity to enter at the “ground floor” of a firm’s stock market journey. Yet, history consistently shows that IPOs are a hot potato game: some leave early investors with sizzling gains, while others burn anyone who holds too long.
In the short term, IPO performance is often driven more by psychology and herding behavior than by business fundamentals. The first day of trading can resemble an adrenaline rush, where fear of missing out (FOMO) dominates rational valuation. But five years later, the reality of financial performance and strategic execution tells the true story.
Let’s revisit some of the most notable IPO debuts—both winners and losers—and assess what happened to them after five years. The comparison underscores an important lesson: fair purchase price and fundamentals ultimately drive returns, not frenzy.
🚀 The Big Winners at Debut — and Their Five-Year Journeys
VA Linux (1999, Nasdaq)
- Debut: The stock soared 698% on its first day, from $30 to $239.25—still one of the largest first-day gains in history.
- Five Years Later (2004): Shares collapsed below $3 as the dot-com bubble burst and Linux server hype gave way to harsh market realities.
Lesson: IPO investors holding VA Linux learned the hard way that hype cannot substitute for revenue. The debut was a classic example of a hot potato—great for traders who sold quickly, devastating for long-term holders.
Beyond Meat (2019, Nasdaq)
- Debut: The stock jumped 163% on day one, fueled by enthusiasm for plant-based protein and ESG investing trends.
- Five Years Later (2024): Shares had declined more than 80% from their highs, squeezed by competition from traditional food companies and consumer fatigue with “next big thing” diets.
Lesson: Investors who bought into the IPO frenzy without considering valuation found themselves with heavy losses. The hype around sustainability themes faded when margins and growth slowed.
Snowflake (2020, NYSE)
- Debut: The stock doubled on its first day (+111%), becoming the largest software IPO ever at the time. Even Warren Buffett’s Berkshire Hathaway participated.
- Five Years Later (2025): Snowflake remains a leader in cloud data services, with a valuation still far above its IPO price, though less lofty than during the 2020–21 tech bubble.
Lesson: Unlike VA Linux or Beyond Meat, Snowflake showed that strong fundamentals, recurring revenue, and execution can preserve value after a euphoric debut.
Rivian Automotive (2021, Nasdaq)
- Debut: Shares rose 29% on day one in one of the largest IPOs since Alibaba. The EV hype was in full swing, with investors desperate to find the “next Tesla.”
- Five Years Later (2025): Rivian struggled with production bottlenecks and cash burn. Shares traded far below debut highs, though the company continues to be viewed as a long-term EV contender.
Lesson: Even in hot sectors like electric vehicles, execution risk looms large. Production capacity, not investor sentiment, decides value over time.
RenaissanceRe Holdings (1993, NYSE)
- Debut: Shares doubled on the first day, reflecting strong demand for a Bermuda reinsurer in a specialized insurance niche.
- Five Years Later (1998): The company had established itself as a reliable performer, rewarding patient investors.
Lesson: Boring industries often outperform. Stability, predictable revenue, and prudent management can beat hype in the long run.
📉 The Strugglers at Debut — Did They Recover?
Facebook (2012, Nasdaq)
- Debut: Technical glitches marred the IPO, and the stock barely gained (+0.6%) on its first day. In the weeks after, it dropped nearly 30%.
- Five Years Later (2017): Facebook had transformed into a digital advertising powerhouse, with its stock up over 600%.
Lesson: A rocky start doesn’t doom a company. Fundamentals—user growth, monetization, and profitability—can erase early disappointments.
Uber (2019, NYSE)
- Debut: Shares fell 7.6% on day one, one of the worst openings for a major U.S. IPO.
- Five Years Later (2024): The company stabilized but remained unprofitable, trading only modestly higher than its IPO price.
Lesson: Brand recognition and market dominance can’t outweigh persistent losses. A flawed business model can suppress returns even if the IPO hype was global.
Etsy (2015, Nasdaq)
- Debut: Shares surged 88% on day one but collapsed by 25% the next trading session.
- Five Years Later (2020): Etsy reinvented itself and soared during the COVID-19 pandemic as consumers flocked to online marketplaces. Shares were up several hundred percent compared to the IPO price.
Lesson: Short-term volatility doesn’t define destiny. Companies with differentiated models can rebound and thrive.
Blue Apron (2017, NYSE)
- Debut: Shares priced at $10 but closed day one at a loss (-5%).
- Five Years Later (2022): The company languished below $1, eventually acquired by Wonder Group.
Lesson: Consumer subscription fads rarely scale profitably. Weak fundamentals combined with competition spelled failure.
Pets.com (2000, Nasdaq)
- Debut: The stock initially surged, but within months, the business collapsed.
- Five Years Later (2005): Pets.com was long gone, remembered only as a symbol of dot-com excess.
Lesson: Some IPOs are destined for extinction regardless of debut-day performance.
🔎 IPOs as a Hot Potato Game
The comparison between day-one euphoria and five-year outcomes highlights the “hot potato” nature of IPOs. Many investors treat new listings as short-term momentum trades—passing the potato quickly to avoid being the one left holding it when the music stops.
- Winners of the hot potato game: Traders who flipped VA Linux or Beyond Meat within hours or days locked in huge gains.
- Losers of the hot potato game: Long-term holders often absorbed brutal losses as fundamentals failed to catch up with inflated prices.
This isn’t unlike an adrenaline rush in gambling: excitement peaks at the opening bell, but once the frenzy fades, reality sets in.
📊 Fundamentals vs. Frenzy
Looking at the evidence, three broad rules emerge:
- Fundamentals Drive Long-Term Value
Companies like Snowflake, Etsy, and Facebook proved that execution, user growth, and profitability ultimately define success—not day-one performance. - Fair Valuation Matters
Paying too high a price for Beyond Meat or Rivian left investors exposed to crushing losses. Entry price is as important as company quality. - Herd Behavior Can Destroy Wealth
VA Linux and Pets.com show how herding, hype, and media frenzy can inflate valuations detached from reality. Investors chasing that adrenaline rush often become bag holders.
📝 Final Word
Five years on, the lesson is clear: IPOs are a marathon, not a sprint. The companies with sustainable models, clear paths to profitability, and disciplined valuations reward patient investors. Those propped up by hype and herd psychology often disappoint.
For today’s investors, the takeaway is simple: treat IPOs with skepticism, study the fundamentals, and resist the hot potato game. The adrenaline rush of opening day may make headlines, but only fair price and strong execution deliver wealth in the long run.
