Investing in IPOs
When new companies become listed on the stock market for the first time, it's call an Initial Public Offering (IPO). This gives the public a chance to own shares in these newly listed companies and access to a new opportunity. Often, these companies have been around for some time and come to the market to raise fresh capital to fund future growth. If you find a high growth company at the right price, it can be very lucrative.
Investing in IPOs: Opportunity, Risk, and Timing
Initial Public Offerings (IPOs) sit at the intersection of excitement and danger. New stories, fresh tickers, big headlines — and often very little trading history. For many investors, IPOs feel either irresistible or completely uninvestable. The truth, as ever, sits somewhere in between.
At Foundry Strat, we don’t approach IPOs as lottery tickets or long-term investments from day one. Instead, we view them through a market structure and lifecycle lens — focusing on when risk is favourable rather than simply what the company does.
This framework is closely linked to The Lifecycle Trade, a concept popularised by Stan Weinstein and later expanded by Mark Minervini and others. The idea is simple but powerful: stocks tend to move through predictable phases as institutional participation evolves. IPOs represent the very beginning of that lifecycle — and that comes with unique behaviour.
Why IPOs Are Different
Unlike established stocks, IPOs typically launch with:
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Limited institutional ownership
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No long-term moving average structure
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Pent-up supply from early holders
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And a market still figuring out “fair value”
This often leads to high volatility, false starts, and sharp pullbacks — especially in the first few weeks. Many IPOs break down quickly after listing, shaking out weak hands before any sustainable trend can develop.
That’s why patience matters.
SharkNinja: A Textbook IPO Base
SharkNinja is a great example of how we prefer to engage with IPOs.
After an initial surge and sell-off post-listing, price began to stabilise and base, forming a tight consolidation range. Rather than chasing the opening move, the opportunity emerged later — when price action started to signal institutional interest.
On the chart, you can see:
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Tight price action as supply dries up
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Moving averages starting to flatten and turn up
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A clear volume expansion on the breakout
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Relative strength beginning to improve versus the broader market
This is classic Lifecycle behaviour: the transition from a post-IPO digestion phase into the early stages of a potential trend.
The Foundry Strat Takeaway
We don’t buy IPOs because they’re new. We buy them when structure, volume, and relative strength align.
IPOs can offer exceptional opportunities, but only if you respect their lifecycle. More often than not, the best trades come after the hype fades, not during it.
In the next section, we’ll break down how to think about IPOs within The Lifecycle Trade framework, and why waiting for this type of setup dramatically improves risk-reward.