For retail investors, jumping on Arm's blockbuster IPO is a risky business

livemint.com:

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. Arm's goal of raising around $5 billion in New York in what might be the biggest IPO of 2023 follows other major listings in recent years whose returns have mostly disappointed. Since Arm, owned by Japan's SoftBank Group's, is not well-known among consumers, it is focusing its IPO marketing efforts on institutional investors, people familiar with the deal said.

That leaves most Main Street investors to buy Arm shares at potentially higher prices once they begin trading. With retail investors holding individual stocks for less than a year on average, recent history suggests they could lose money, a Reuters analysis shows. The 10 biggest U.S.

initial public offerings (IPOs) 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%. Only two of the stocks in those top 10 are up from their IPO prices: software seller Snowflake and Airbnb, which leads with a 111% return.

While dabbling in individual stocks is a notoriously risky business for amateur investors, the analysis underscores just how perilous it can be to buy into blockbuster IPOs on Day One. Even institutional investors invited to buy into those 10 IPOs before trading would be down an average of 18%. The S&P 500 has gained an average of 13% since each of those IPOs, nine of which