A (3:50)

Yeah, I didn't make that connection, Jason, but just make a lot of sense. I mean, the market does hate uncertainty. And why would companies like uncertainty any more than the market does? For the people listening who are members of the Motley Fool's EPIC service and our podcast that we taped it yesterday, our EPIC Roundtable podcast, one thing that I mentioned was with falling interest rates, I think that the level of uncertainty associated with economic data, whether that be jobs reports or inflation reports, and the last of trustworthiness that's been cultivated around these reports of data, it's probably going to lead to a lot more variability in market returns simply because of the uncertainty around the market. So it is interesting to make that connection there. But Semit, I mean, something that stood out to me outside of the uncertainty that Jason mentioned, the election year, all that stuff, was that the market seemed kind of selective, I guess, about the IPOs that it chose to reward and punish. And of course, sticking with the theme of the year, it seemed like the AI based IPOs just attracted a lot more attention and capital. When you reflect on the IPO market this year, do you think that was what was leading demand for IPOs outside of the election and stuff, but just AI? Or was it everything else that Jason mentioned? And then taking that one step Further, if the AI bubble burst in 2026, does that mean that the IPO market's set up for failure?

C (5:01)

Yeah, you know, demand for AI capital is a substantial share of the total 38 billion of IPO proceeds raised. If you look at that 38 billion that was raised this year, about 43% of it know you have 16 half billion was AI related, you know, but, but it was very specific. You know, public investors bought the infrastructure like cor's, one and a half billion listing software applications like Figma, the actual model builders, they stayed private, raising nearly double what the entire IPO market did, just without the ticker symbols. So while AI was a big portion of the IPOs that did come out into on onto the public markets, there's still a lot of money going to AI in the private markets that public investors don't even have access to. Now, if the AI bubble bursts in 2026, I definitely think the IPO market is set up, maybe not for failure, but I think the spigot of the IPO market will tighten and we'll start to see a little less IPOs out there. Because let's, let's be honest, AI demand is what's driving so much of the markets right now.

A (6:06)

Yeah, it'll be so interesting to see what happens with that in 2026. Because there are, to your point, while a lot of big AI driven companies raising a lot of capital in public markets, to your point, there's a lot more private companies that don't need to go to public markets to get capital. Everybody is throwing money at them hand over fist. And why would you raise additional equity when you can raise additional capital without having to put yourself through the process that is enlisting and going through an ipo. So it'll be interesting to see when that, if and when that AI bubble bursts, so to speak, if that happens on the private side, which forces these companies, which are unprofitable, to start trying to raise equity from the public, or if the appetite across the board dries up so much that even if they try to go get an IPO, that there isn't the appetite for it from public investors or institutional investors. I tend to lean on your side, Sami, which I think 2026 is set up for a maybe more challenging year than 2025, but that dynamic will be really interesting to watch. Up next, we'll be discussing the most popular IPOs of 2025 and discussing if they have the rule breaking characteristics we look for. Stick with us.

D (7:07)

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A (8:18)

Money IPOs can be a hot commodity, but that doesn't necessarily make them great investments. Of course. That being said, 2025 was a strong year for IPOs and that seems to have, you know, a lot of rule breaking characteristics for the ones that did particularly well, including Core weave, Figma and Klarna Sunmeet. I want to start with Core Weave, the ticker crw for investors who aren't familiar. We talked about the demand for AI based IPOs earlier in the show and Core Weave is kind of the poster child for AI IPO access. It was priced at $40 when they went public. Shares skyrocketed to over $180 in the following months. A lot of gains have been given back, but of course shares are still outperforming the market. And when you look at the characteristics of a rule break, some of that includes past price appreciation and the perception of overvaluation. So when you look at Core Weave and the rule breaker framework, is that the most interesting IPO to do this year or was there another one that stuck out?

C (9:11)

Yeah, so Core Weave wasn't the most interesting. The most interesting IPO for me this year was Figma, and that's one that I'm digging into more. But it's already proven to be a rule breaker in its core market of web based collaborative design. And it has a history of high growth and improving economics. Stocks trading around $17 billion, which is less than the 20 billion DOL Adobe had previously offered to buy it. You know, the company is a top dog first mover in AI based collaborative design world with a clear path to monetization. So finally its founder also owns about 13% of stock. Not something that's necessarily important in the rule breaking investing, but nonetheless it's still appealing.

A (9:49)

It's been so interesting to watch Figma's rise to public markets because Adobe, to your point, sent me, offered to buy them. They're trading below that. And I think a lot of investors, myself included, kind of were happy that that deal from Adobe fell through because it was such expensive price at the time to pay for a company like Figma. But Adobe's getting a lot of skepticism right now around how they're managing artificial intelligence and how that threatens their core design model. But Figma seems to have avoided a lot of that. And I think it goes to show just the strong relationship they have with the artists, creatives and developers that use their platform, even enterprise customers. They've developed a strong name for themselves. So it's certainly one I'm also interested in. Jason Samit. Like Figma, the ticker is Fig. But that obviously was not the only big IPO this year. In addition to Core, Weave and Figma, some others off the top of my mind include Chime, Klarna, Circle. I mean they're all disruptors in their own right and also made interesting decisions not to go public prior to this year. But what's IPO stood out for you? I mean, for better or worse.

B (10:48)

So the two outliers to me were Klarna and Fig and, and Circle and Klarna because it's a 20 year old company and it's a bank in Europe. So it's been reporting financial results that are publicly available for many, many years. It's not often you get an IPO where you have a ton of data about the company's financial results and balance sheet that you can look at. But the one that actually stands out the most is Circle because it's so different. This is, guys, this is a crypto company. Its core business is digital currency, specifically the USDC stablecoin. And over the past year it's doubled the amount of USDC in circulation, about $74 billion. That's a lot. But there's a lot of other things that it's doing in payments and using digital assets in ways that would disrupt the status quo in finance while at the same time kind of partnering with the status quo, like Visa. Get this, guys. It just got conditional approval to be a bank. Yeah, you heard me right. The Office of the Comptroller of the Currency, the occ, just gave Circle the green light to start the process of becoming a federally regulated trust bank. What a time to be alive. You guys remember when crypto's biggest selling point was decentralization and not being tethered to the traditional financing banking system? Guys, this is just wild.

A (12:13)

I mean, I. I think that's still part of the thesis. Like, sometimes you have to play the game, and I give credit to Circle here that I think the winner and the. I don't know what to call it. The. The stablecoin space or the cryptocurrency space, the payments platform, whatever you want to call it. I think you have to operate to an extent within the means that are existent in the world. And maybe at some point they can bring the disruption I think they always wanted, but sometimes you have to fight the battle from the inside.

B (12:39)

Yeah. I just can't help but wonder if Shytoshi is no longer with us, because how could this person not have come out against what crypto has become over the past three or four years?

C (12:51)

Well, one day we'll be paying for pizza with. With crypto coins, that's probably for sure.

A (12:57)

Oh, dare to dream.

B (12:58)

It's heading that way. Yeah, it's heading that way.

A (13:01)

Up next, we'll be looking forward to 2026 and their IPO markets with a hot one already on the table and discussing if it ever makes sense to buy on day one. This is Molly Foley.

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A (14:16)

Money. Welcome back to Motley Fool. Money. With 2025 having been a hot year for IPOs, all eyes are on 2026. Conviction does seem to be high at the moment. We just had news out that SpaceX is recently announcing its own plans to go public either in 2026 or 2027. We don't know the valuation yet, but it's been rumored to be up to one and a half trillion dollars. Oh my gosh. Send me when you heard that SpaceX is going public or intends to go public, did you have any immediate thoughts on if you view it as an opportunity you like more or less optimistic about the IPO market heading into next year?

C (14:52)

I thought the IPO market is going to the moon. Sorry, bad joke. But you know, SpaceX is, you know, is an exciting and sexy name. You know, space rockets, you know, how, how can that not be Elon Musk? Keep the I Elon Musk. How can that not keep the IPO markets spigot flowing? You know, but you know, at a proposed valuation of one and a half trillion for a cash burning business, it gets me more worried than excited. You know, if SpaceX does go public, goes into the S and you know, you'll have institutional investors stammering to buy it or face career risk. You know, you don't want to be left out. Also, while it keeps the IPO markets humming, it also sucks out the air in the room for smaller issues going public. Now could you imagine being one of those smaller companies raising money or going on roadshows at the same time you have SpaceX asking for one and a half trillion. I mean that's, that's tough, tough going.

A (15:43)

Yeah. I didn't think about the downstream impacts that a large IPO has on other companies, but I can, I certainly think to myself that I would not want be going public at the same time as SpaceX. The good news, of course, for institutional investors is that if SpaceX is unprofitable, then at least they won't be eligible to join the S&P 500 unless they start to make an exception on the committee. But we know one thing, right? Elon Musk and his companies, as it did with Tesla, they'll drag out the lack of profits, but the moment they turn that spigot on, institutional investors do run to it. And that's what we saw when Tesla had joined the S&P 500. I'm kind of interested in SpaceX. I have always had a fascination with space. I said it on the podcast before. I have lost a lot of money with my Virgin Galactic shares, but which I also did, by the way, buy pretty soon after the IPO clearly did not work out for me. I mean, Jason, you're the smart one in the room here. You've been outspoken about why it never makes to buy since or never makes sense to buy into an ipo. And it's true that there's a lot of challenges with liquidity or whatnot, pricing. But outside of just the practicality of it, why are you against the idea of purchasing IPOs on day one? And how long do you normally wait to buy into an idea that you like when they go public?

B (16:50)

So I'm not entirely against it. I'm almost entirely against it. So there's always that sliver of you're telling me that there's a chance, right? But I want to answer the last question first. And in general, I don't be don't buy IPOs for about a year or two. And if I do, it's almost always a very, very small investment. And my basic figuring is if it's a great company, it's still going to be a great company in a year or two. And I'll have a lot more information to decide if it really is a great company or if the stock has just gone up. I also know there's a dirty little secret for a lot of IPOs. And in many cases they're not a source of new capital for the business. They're an exit strategy for existing investors to sell their shares and the companies don't necessarily get any proceeds. I'm not interested in being somebody else's bag holder. And let's be honest about the the state of venture capital. It has become more and more institutionalized. More and more companies stay private longer, they get bigger, longer. They don't necessarily need the capital when these big companies go public. And there's just more risk of being that bag holder for a large institutional investor. Now there's a more nuanced answer. There was some there, but really what it gets down to at the core is if we are talking about a disruptor, a high growth company going public, a Lot of times we just don't really know if they're scaled up enough to perform well. Coming out of that nice warm incubator environment, moving into the cold, hard light of the quarterly demands of Wall street, we don't know how their management's going to respond. And for every Klarna where we have a decade of publicly traded information, there's 75 companies that are unprofitable, growth focused. We just don't know if they're going to sink or swim.

A (18:35)

That makes sense. And you know, I always think about it when I bought my shares of Virgin Galactic, going back to, really my only example for my personal portfolio of buying in pretty quickly after an ipo, I kind of viewed that not necessarily as an investment, but as an expense and a, a way to track and follow an industry that I was otherwise interested in.

B (18:53)

There's, there's one more thing I want to add here, and that's so many times when people are buying close to the ipo, they're not using a process or a framework. It's just FOMO versus two things that I think are really important when it comes to buying new companies that have just shown up on public markets. And that's mistake avoidance and regret minimization.

A (19:14)

Beautifully said. And now we're going to take that wonderful commentary and then explain all the reasons why our logical brains don't always follow that logic. Right. So are there times, despite Jason's great argument that there should be exceptions, times when it makes sense to you personally to buy into an ipo?

C (19:32)

I mean, absolutely. You know, so much investing is heavily relying on qualitative and quantitative analysis. But the dirty little secret of great investors is use. They use a lot of intuition to guide them. You know, I'm not saying to solely rely on intuition, but a healthy dose can really improve investment outcomes. Now, in relation to buying IPOs on day one, you know, if you find a paradigm shifting company that your gut is telling you this, this could be big, and you're, and you're willing and realistically going to hold it for decades or longer, why miss the opportunity to even invest a small allocation of your portfolio? You know, my biggest regret was not buying Google on day one due to overthinking, calls of overvaluation, whatever would I have really regretted if I just invested even just $500 back then? I think, I think now not all companies are going to be Google. But this is part of the fun of investing. Take a little stake in something that you think could really become something big and you never know, you might surprise yourself.

B (20:30)

Well, part of that regret minimization can be when you feel a lot of conviction and you figure out how to see the difference between conviction and fomo. Right. Because sometimes going with your gut, you know what guts are full of and it's not good. We have to remember that. But part of regret minimization is taking that small stake, like you said, and being disciplined about the way you think about it.

A (20:51)

Really nicely said, guys. As we wrap up today's show, I know I am personally more excited to see what happens in 2026 as it applies to the IPOs and potentially add some of these really interesting 2025 IPOs like Circle or Figma to my own personal portfolio. Jason and some meat. Thank you both so much for joining today. As always, people on the program may have interest in the stocks they talked about, and the Motley fool may have formal recommendations for or against. So don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. For Jason Hall, Samit Dayo and the entire Motley fool money team, I'm Emily Flippin. We'll see you tomorrow.