Price Matters
What every investor should ask before the next big IPO
Would you pay $25 for a brand-new iPhone? I would.
Would you pay $25,000 for a dozen eggs? You’d have to be crazy.
Price matters. When you’re shopping for groceries, you instinctively ask, “What am I getting for the money I’m paying?” Yet many investors happily buy a story without ever asking the same question.
2026 is shaping up to be the biggest IPO year in history. SpaceX is reportedly heading to market at roughly 90 times revenue. OpenAI is reportedly looking at something in the 60–80x range. Anthropic somewhere closer to 20–25x. Stripe, Databricks, and a long list of others are queued up behind them. By comparison, the average stock in the S&P 500 trades closer to 3 times revenue.
Any of these could turn out to be the bargain of the decade. Or, as some Wall Street veterans quip, “IPO” can mean “it’s probably overvalued.” I have no idea which will be which, and I’d be skeptical of anyone who claims they do.
In fairness, companies at their earliest stages of development are some of the hardest to value properly. Many have no earnings yet — sometimes by design, as they pour every available dollar back into growth — which means the usual yardsticks like price-to-earnings, dividend yield, and free cash flow either don’t apply or produce wild answers. Analysts are left projecting revenue and profits years into the future and discounting back to today, and that is more art than science. Two thoughtful, experienced investors can study the same company and reach very different conclusions about what it’s worth. That’s part of what makes IPOs both exciting and treacherous.
But here is the part that is not a guess: the price you pay decides the return you earn. Imagine two investors who both buy the same great company and hold it for ten years. The one who got in cheap walks away with a strong return. The one who paid up for the story may end up with little to show for it — even though the company performed beautifully. The math is unforgiving: the higher the price at purchase, the more growth the business must deliver just to break even. A great business bought too expensively can still be a poor investment. A mundane business bought cheaply can be a wonderful one. The company is only half the equation; the price is the other half.
Cisco is the example worth memorizing. In March 2000, Cisco was the most valuable company in the world, briefly trading at around $80 a share. It was — and this part is true — one of the companies actually building the internet. The story was real. The company delivered on it: over the next 25 years, Cisco’s revenue roughly tripled to about $57 billion, and earnings per share grew by more than ten times. And yet the stock did not set a new all-time high until December 2025 — more than 25 years later. An investor who bought at the peak waited a quarter century just to get back to even, and that’s before subtracting what inflation did to those dollars in between. The company performed beautifully. The price was the problem.
The good news is that you don’t need to solve the valuation puzzle yourself to share in the growth of these companies. I wrote a full investor’s guide to the 2026 IPO wave — SpaceX, OpenAI, Anthropic, and the rest — covering how allocations actually work, what history teaches us about IPO returns, and several sensible ways to participate (in appropriate amounts) without having to be right about price.
Read The Investor’s Guide to IPOs on InvestmentInsights.com.
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