A Confession From the Author

I’ve received an email or a text everyday for the last week about SpaceX. I also have clients who are former or current employees of SpaceX - trust and believe, they are more excited about selling the stock than buying it. You are their potential buyer!

I’m not just an advisor, I’m also an investor. I’ve purchased many IPOs for my own portfolio and for clients over the years. 

I want to tell you about four of my IPO experiences. My buyer-beware mentality is deeply rooted in my recency bias more than my legacy bias, more on this thought later. 

In 2006, I bought Mastercard on IPO day. It was priced at $39 and opened for trading at $46. Not the sexiest story. A payments network. No viral product. No rocket ships. I bought it as part of a long-term allocation thesis and have held it for years, trimming along the way only to keep it within a 5% portfolio target. That is the only reason I ever sold a share. Not fear. Not excitement. Allocation discipline. Mastercard is now trading near $500 per share and that's after a 10-for-1 stock split in 2014. The $39 IPO price is effectively $3.90 in today's split-adjusted terms.

Now let me tell you about the other three.

In 2018, I bought DocuSign on IPO day. It was priced the night before at $29, but by the time trading opened the next morning, the stock was at $38. That's how IPOs work, the institutional buyers got $29. I paid $38. And I held on. The thesis made sense: the world was going digital, and nobody was going back to printing, signing, and scanning. Then COVID hit and everything went parabolic. The story got louder. The price got higher. And I stayed right up until the story started to quietly unwind. Competition came. Growth slowed. I sold most of my position at a loss from my average cost. The thesis changed. I updated my position.

In 2015, I bought Teladoc on IPO day at $28.50 well above the $19 offering price that institutions paid. The telehealth story was compelling. Then COVID arrived and turned it into a phenomenon. Teladoc peaked near $300 in early 2021. The world, it seemed, would never see a doctor in person again. Then we went back outside. The company never delivered on its post-pandemic growth promise. Today, TDOC trades near $6. I sold most of my position at a loss.

In 2020, I bought Snowflake on IPO day, possibly the most extreme example of the institutional advantage in this entire blog. Snowflake priced at $120 for institutional buyers the night before. By the time retail trading opened the next afternoon, it was at $245. I paid more than double what the insiders paid. Warren Buffett, who almost never touches IPOs, got shares at $120. I got shares at $245. I eventually broke even. The thesis on Snowflake, interestingly, still feels intact to me which is why I've recently considered adding it again, this time on my terms, at a valuation that reflects today's reality rather than 2020's mania.

The stock I bought in 2006 and thought the least about is the one that has compounded quietly for nearly two decades. The three I bought with the most conviction, during the most exciting market moment in recent memory, are the ones that sting.

Recency bias pulls your eyes to the last three years. Legacy bias, the quiet weight of a two-decade compounder, should anchor you. The problem is the brain doesn't experience time that way. A loss from 2020 feels closer and louder than a gain from 2006, even when the 2006 gain has quietly lapped everything else in the portfolio. That asymmetry is not rational. It is very human.

The difference between Mastercard and the other three isn't that I was smarter in 2006. It's that the thesis never unwound. Buy equities for what they can become over a decade. Hold until the thesis breaks. Make sure it fits your plan. 

The rest is noise.

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