Retail traders getting their first bite at Arm Holdings’ highly anticipated public offering when the British chip designer begins trading this week should beware: individual investors often get burned when they jump on hot listings.
The 10 biggest U.S. initial public offerings of the past four years are down an average of 47% from the closing price on their first day of trading, according to the analysis of LSEG data as of Friday. Investors who bought at the top of an intra-day price surge that often occurs in high-profile listings would have fared even worse, with an average loss of 53%.
The S&P 500 has gained an average of 13% since each of those IPOs, nine of which happened in 2020 and 2021. While Arm is a business-to-business company with little consumer brand recognition, its IPO publicity is likely to attract retail interest, said analysts. Nvidia, the chipmaker at the center of an artificial intelligence boom, has been a retail favorite this year.