A 38-year-old software sales executive from Newport Beach, California purchased shares of a highly anticipated technology IPO shortly after it came public. Having spent his career around startups and innovation, he was convinced he had found the next transformative company. After an initial rally, however, the stock fell sharply below its offering price and remained there.
Every review meeting included the same comment: “When it gets back to the IPO price, I’ll decide what to do.” That number became deeply embedded in his thinking. As time passed, it became increasingly clear that the IPO price had little relevance to the company’s future prospects. Yet psychologically it was enormously important because getting back to that level would validate his original decision.
During one meeting, I asked, “If this stock had never been an IPO and was simply trading where it is today, would you buy it at this price?”He paused for a moment and admitted he wouldn’t. That was the breakthrough. We stopped focusing on the past and started evaluating the opportunity based on future potential. He eventually reduced the position and redirected the proceeds into investments that better aligned with his objectives. The lesson wasn’t really about IPOs. It was about how easily investors become trapped by numbers from the past.
