The stock market allows investors to share in the long-run profits generated by well-run businesses. It also allows speculators to buy lottery tickets on startups that may succeed but usually don’t.
In 2022 Jay Ritter, a finance professor at the University of Florida, reported on how IPOs issued between 1975 and 2018 had fared over the subsequent three years: 59% had negative returns, and 37% were down 50% or more. The average three-year return was 17.1 percentage points below the return on the overall stock market.
Until recently, this dismal performance hadn’t squelched demand for…
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