Marc Rubinstein cuts through the hype of the resurgent initial public offering market with a sobering statistical reality: the vast majority of new listings are value traps, not goldmines. While the financial press celebrates the return of activity, Rubinstein argues that the "Class of '25'" faces a historical pattern where only a tiny fraction of companies actually generate wealth for public investors.
The Illusion of Opportunity
The core of Rubinstein's argument is that the excitement surrounding the current IPO boom is misplaced. He points out that after lying dormant for over three years, the market has suddenly sprung back to life, with Goldman Sachs CEO David Solomon noting, "This week, we will do more IPOs and have more IPO activity at Goldman Sachs than we've had since July 2021." This surge creates a compelling narrative for investors seeking high returns, but Rubinstein warns that the data tells a different story. He reminds readers that while some deals like Visa and Square created massive value, these are statistical outliers.
The author leans heavily on Warren Buffett's skepticism to ground his analysis. As Marc Rubinstein puts it, Buffett has described how "an IPO situation more closely approximates a negotiated deal": "The seller decides when to come to market in most cases. And they don't pick a time, necessarily, that's good for you." This framing is crucial because it shifts the focus from the company's potential to the timing of the sale, which is dictated by the seller's need for liquidity rather than the buyer's opportunity for value. Rubinstein supports this with a stark statistic: research shows that only 38.65% of stocks that went public between 1975 and 2020 outperformed Treasury bills.
The best returns were concentrated around just a few names, while the rest combined to match the return of Treasury bills.
This evidence holds up well against the narrative of easy money. However, critics might note that the comparison to Treasury bills ignores the risk premium investors demand for equity exposure; a stock matching a risk-free rate is a failure, but the variance in outcomes is the real story. Rubinstein acknowledges that the "Class of '25'" is different from the 2021 cohort, noting that the median age of companies is now older, with firms like Klarna and eToro having been around for nearly two decades. This maturity suggests a more stable foundation, yet the historical precedent remains a heavy anchor.
The Mechanics of Underpricing
One of the most fascinating aspects of Rubinstein's coverage is his dissection of the "first-day pop." He observes that while most new issues surge on their debut, this initial gain is often a trap for long-term holders. He writes, "All but nine popped on the first day of trading, gaining an average of 30%, while the few that declined lost only 7% on average." This asymmetry creates a false sense of security, leading investors to believe they are capturing value when they are actually participating in a transfer of wealth.
Rubinstein highlights the views of venture capitalist Bill Gurley, who argues that this underpricing is not an accident but a feature of the system. Quoting a 1999 Goldman Sachs memo, Rubinstein notes: "The hot deals are obviously a currency, which can be used to please institutions, please high net worth individuals…etc." This exposes the structural incentive where banks leave money on the table to reward their preferred clients, effectively taxing the broader public market. The author calculates that in 2021 alone, $28.65 billion was left on the table across all IPOs.
The article also draws a parallel to the Special Purpose Acquisition Company (SPAC) experiment, which offered an alternative route to market but failed to solve the underlying problem. Rubinstein points out that in the SPAC cohort, "just like the IPOs, three-quarters are trading down from their initial price." In fact, the situation was even worse for SPACs, with many companies dropping by more than 90%. This comparison effectively dismantles the idea that the method of going public matters as much as the timing and the quality of the underlying asset.
The seller decides when to come to market in most cases. And they don't pick a time, necessarily, that's good for you.
The Class of '25 and the Trading Thesis
As Rubinstein turns to the current wave of listings, he identifies a distinct thematic shift. The 2021 cohort was dominated by payment processors riding the pandemic wave, whereas the current group leans heavily into "financialisation." He argues that as retail stock ownership grows and trading costs fall, the universe of tradable assets is expanding. The new listings, including Klarna, Bullish, and Circle, sit at the nexus of this trend.
However, the author remains cautious about the long-term performance of these firms. He notes that while Robinhood has surged over 200% since its 2021 debut, the average return of the other 35 fintech deals from that year is -30%. This disparity suggests that the market is becoming increasingly binary: a few winners capture all the upside, while the rest languish. Rubinstein's analysis of the "Class of '25'" suggests that while the companies are older and perhaps more mature, the fundamental dynamic of the IPO market has not changed.
A counterargument worth considering is that the current environment of high interest rates and regulatory scrutiny might actually filter out weaker companies, leading to a higher quality cohort than in 2021. Rubinstein hints at this by noting the older median age of the new entrants, but he does not fully explore whether this structural change is enough to overcome the historical underperformance of the asset class.
Bottom Line
Marc Rubinstein's strongest contribution is his refusal to let the excitement of the IPO market obscure the brutal math of historical returns, proving that the "first-day pop" is often a signal of value transfer rather than value creation. The argument's biggest vulnerability is its reliance on long-term historical averages that may not fully account for the unique maturity and regulatory environment of the current fintech sector. Investors should watch whether the older, more established companies in the "Class of '25'" can break the historical pattern of underperformance or if they will simply become the next group of cautionary tales.