What I've Learned About IPOs Through My Investing Career

By Samer Nusier, VP of Product & Strategy, RBC Direct Investing

I first started investing for myself when I was 18. I was drawn to it right away, even though I certainly didn't know what I was doing. Something about the process fit my personality: the research, the need to understand how a company actually made money, the idea that if you paid close attention, you could figure things out that weren't obvious on the surface. I'd immigrated to Canada from Jordan at 16, and I think part of it was that investing felt like a way to objectively understand some things, among a sea of newness.

I made plenty of mistakes along the way. I overthought things. I waited too long when I should have moved and moved too fast when I should have waited. But I kept investing. I never could have imagined that my interest would turn into my career, but now here I am, and I've figured out a few things about IPOs that I wish someone had told me at the start.

Just this week I had the chance to share some of those lessons during a Reddit AMA with Canadian investors. The questions were honest, sharp, and often the exact same ones I'd been asking myself decades earlier. This article is my attempt to put everything I said that day, and everything I've learned since, in one place. It's not a pep talk. It's what I actually know from both sides of the table.

The big dogs eat first

The whole appeal of an IPO used to be getting in early. The reality, at least for self-directed investors, is that you're not first in line. Institutional investors like pension funds, and fund companies go ahead of you. By the time it gets to retail investors, the queue has already moved quite a bit.

The most common question from the AMA was some version of: I put in a request for IPO shares. Why didn't I get them all? That's why.

Here's how it works. When a company goes public, the underwriting syndicate solicits interest in the offering. Institutional investors get first access because they’re bigger, they buy in volume, and they have existing relationships with the underwriters. The allocation process is decided by the syndicate before your broker ever gets involved. Size and scale determine priority.

So if you request 500 shares of a hot IPO and receive 50, you haven't done anything wrong. The system just works that way.

What I can tell you is that at RBC Direct Investing, looking out for our clients means making sure they actually get a seat at the table. Our approach is to prioritize ensuring as many investors as possible get an opportunity to participate. In our most recent IPO, nearly 90% of clients who requested shares received at least a partial allocation. That's not the industry norm. It's something we've built intentionally because we think self-directed investors deserve a real shot.

Still, even with a strong allocation rate, you will often receive fewer shares than you requested. Go in with that expectation and you won't be caught off guard. Don’t let this sour you on IPOs all together, it’s just the way they work.

The pop is real — but it's rarely yours

You've probably seen the headlines. Company X goes public, shares jump 40% on the first day. It reads like free money.

Here's what those headlines almost never mention: that first-day pop is measured from the IPO offer price, not the opening price. If you received an allocation at the offer price through your broker before trading opened, you're in a position to benefit from that gain. That's exactly what a strong IPO allocation process is designed to do for you. But if you didn't receive an allocation and you're buying at market open, you may be arriving after the pop has already happened. You're buying from the people who were in at the offer price.

The offer price is the potential reward for being in early. The opening price is what everyone else pays. On a big IPO day those two numbers can be very far apart, and if you're buying at the open without an allocation, that gap could work against you. It's the central misunderstanding that leads investors to chase IPOs at the wrong moment and end up disappointed. The key is to do your research and understand what price level you’re comfortable buying at.

Should I flip IPOs?

One of the most frequent questions I get from friends and family is: "Can I make money flipping IPO stocks?"

The data is pretty clear on this. The average open-to-close return on IPO day is approximately zero, and the median IPO actually closes below its opening price on day one. So if your plan is to buy at market open and sell before the close, you're probably not picking up easy gains. You're more likely to end up with less than you started with.

Beyond the math, there's a practical penalty most investors don't know about: if you sell your allocated shares too quickly, some brokers will exclude you from future IPO allocations.

The general rule is simple: if you got in at the offer price, you're in a good position. Sell on impulse and you give that advantage away twice.

Let’s be honest, some investors may do just fine choosing to flip an IPO, just be aware that, as a rule, a quick flip loses money more than half the time. And it could mean missing out on future opportunities because your broker excludes you. Something to consider.

The IPO lock-up clock

If there's one piece of IPO knowledge I wish every self-directed investor had, it's this: track the lock-up expiry date.

A lock-up is a legally binding agreement that prevents company insiders (founders, early employees, early investors) from selling their shares for a set period after the IPO. It exists to stop insiders from immediately cashing out and flooding the market with shares right after the company goes public. That period is typically around six months. When it expires, that's when things get interesting. Those insiders are free to sell, and when a large group of people who've been holding for months can suddenly sell all at once, the dynamic of the stock can shift fast.

The lock-up expiry doesn't always cause a price drop. Sometimes the company has performed well enough that insider selling is absorbed without drama. But it often introduces volatility, and if you're not expecting it, that volatility can feel like the bottom falling out when it's actually a predictable, calendar-driven event.

A few things worth knowing:

• Different insiders can have different lock-up windows depending on their individual agreements.
• Lock-ups can be waived early by underwriters, which means the expiry you're expecting might shift.
• The prospectus will tell you who has what lock-up and when. Read it.

That last point deserves its own emphasis. Read the prospectus. I know it's long. I know it's dry. But the lock-up schedule, the insider ownership breakdown, and the use-of-proceeds section can tell you more about the real risk profile of an IPO than any analyst note.

In my experience, that date is one of the most important things to have on your radar.

IPOs or ETFs? It comes down to conviction

Here's something that might actually surprise you: on average, IPOs underperform the broader market over the long run. Not by a little. The average three-year return from the first closing price is negative on a market-adjusted basis. Most IPOs underperform comparable indices over five years. Most people don't know that, because it's not the story the headlines tell.

That's not a reason to never invest in an IPO. There are genuinely great companies that go public, and some do go on to outperform. But it is a reason to be honest about the base rate, and to think carefully about whether your belief in a specific company is strong enough to justify the risk. IPOs require more research, more conviction, and a longer time horizon than most beginners assume.

Buying because you've heard of the brand, or because the coverage is exciting, or because everyone else seems to be doing it: those aren't reasons. They're noise.

What I'd tell myself when I started investing as an 18 year-old

The single biggest lesson from my investing career isn't about IPOs specifically. It's about time. By that I mean simply this: the longer you stay invested, the more you let the markets do their job. You're not timing anything. You're not picking the perfect moment. You're just giving your money the room to grow, and giving compound earnings the years it needs to actually work.

I started at 18. For a long time, I thought that was too early: that I didn't know enough, didn't have enough money, and should wait until I had more of both. What I didn't fully appreciate was how much the head-start mattered.

Compounding interest is most powerful when it has the most time. Start at 18, even with $50 a month, and the math does the work over decades. The math rewards you for starting early, not for starting perfectly.

The biggest mistakes I've seen, and made, are overcomplicating it, waiting for the "right time," and chasing hype. None of those strategies work.

And if you feel anxious about investing? That's completely normal. The AMA proved that anxiety is one of the most widely shared feelings among new investors. It doesn't mean you're not ready. It usually means you're paying attention, which is exactly the right instinct to have.

Most investors like to start early and stay diversified. They avoid the noise and focus on long-term decisions they can actually commit to.

Ready to start investing and take the next step?

I'll acknowledge the obvious here: I'm not exactly a neutral party. I work at RBC Direct Investing, I helped build parts of this platform, and I genuinely believe in what we're doing. So, take that for what it's worth.

What I can tell you is that we're not standing still. We're always looking for ways to make the experience better for self-directed investors, whether that's improving how IPO allocations work, making the research tools more useful, or just reducing the friction between you and a good decision. It's something we take seriously.

Whether you're exploring your first IPO or just getting started, RBC Direct Investing has tools, research, and access you'll need. Check it out if you're interested.