Cathie Wood: Biggest IPO Gains Come Before Listings

Cathie Wood, founder and CEO of Ark Invest, argued in recent public remarks that the largest gains tied to initial public offerings often go to investors who buy stakes before a company lists.

She pointed to late-stage private investors and holders of pre-IPO stock as capturing much of the upside when companies are repriced in private funding rounds, which can reduce immediate room for large first-day gains on public listings.

Private funding rounds, secondary sales and venture investments can raise company valuations ahead of an IPO. Lock-up agreements, the timing of capital raises and higher valuations in late-stage deals can limit the scope for big opening-day increases.

Ark Invest looks for high-growth companies early and holds positions over the long term. Wood highlighted pre-IPO access and participation in late-stage financings as ways some investors secure different return profiles than those who buy at the public offering.

Analysts cite several mechanisms behind the pattern Wood described: multiple private revaluations as companies progress through funding rounds; private valuations that are carried into the IPO price; and gains realized by early shareholders who hold through listing. Market factors such as investor demand, the supply of shares at listing and selling pressure after lock-up expirations also influence post-IPO performance.

Interest in private-market access has grown, including direct secondary markets, funds that buy private company stock and negotiated placements. Regulators and market participants have discussed differences in transparency, valuation methods and investor protections between private and public markets.

An initial public offering is the process by which a private company lists shares on a public exchange. Before an IPO, companies typically raise capital through private equity, venture capital and late-stage financing rounds that set valuations and influence the IPO price.