The stock markets are showing a positive outlook with Donald Trump’s return, while seemingly overlooking the possible tariffs he has often indicated for America’s major trading partners.
IPO bankers, who have been gearing up for what many predict to be a remarkable year for public offerings, have one straightforward request for the president-elect: Will he avoid meddling with the market?
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Despite witnessing over a 60% increase in volume compared to 2023, US initial public offerings continue to bounce back from a series of interest rate hikes that limited pandemic-related stimulus measures and instigated a stock market correction.
While the precise timing for a return to pre-pandemic conditions remains unclear, 2025 is being highlighted as a target—assuming the new administration’s policies don’t upset the current momentum.
“The primary concern is the onset of unnecessary volatility throughout the market,” stated Clay Hale, co-head of equity capital markets at Wells Fargo & Co.
“In a volatile environment, investors tend to focus on their own portfolios and may hesitate to invest in new public companies.”
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Taking a company public is often compared to navigating an aircraft carrier: it requires a lengthy process involving detailed documentation, engaging investors, and tidying up the balance sheet.
With a sustained phase of relative stability, dealmakers have been preparing for high-profile launches like CoreWeave, Medline Industries Inc., and Genesys Cloud Services Inc., potentially raising billions of dollars collectively.
A wave of substantial deals in the coming year might exceed the $43 billion gathered through initial share sales this year on US exchanges, according to Bloomberg data.
Even with markets approaching historical peaks amid positive forecasts for economic growth, “some level of uncertainty continues to prevail,” notes Kevin Foley, global head of capital markets at JPMorgan Chase & Co.
“While there is optimism that the new administration will promote deregulation and lower inflation, introducing tariffs generally contributes to inflation,” Foley remarked in an interview.
Challenges in private equity
The rapid rise in costs could prompt the Federal Reserve to reassess its interest rate approach.
This situation could worsen the challenges facing private equity firms, which are currently managing nearly $3 trillion in companies poised for public offerings or sales, all while facing increasing debt servicing costs.
“Much of the expected activity will likely stem from the private equity arena,” remarked Arnaud Blanchard, global co-head of equity capital markets at Morgan Stanley, whose firm anticipates a flurry of deals backed by buyout firms.
“However, the current environment isn’t like 2020; the focus will remain on high-quality assets, where the raised amounts and implied market caps are significantly boosted.”
Deal activity in 2025 is expected to more than double the figures seen during the lowest point of the post-pandemic downturn, should the largest anticipated deals materialize, according to Bloomberg’s analysis. Nonetheless, this does not offer a simple escape for firms grappling with balance sheet predicaments.
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“Some PE-backed endeavors will target prime assets exhibiting growth and scale, while others need to address leverage issues, ensuring they set valuations that attract buyers,” explained Jimmy Williams, head of West Coast technology ECM at Jefferies Financial Group Inc.
“For the latter, there exists a disparity between what investors are willing to pay versus what sponsors may accept for companies they have owned for a prolonged period.”
The current situation for US IPOs reveals a significant lack of technology-related debuts since 2021. Traditionally, this sector contributes a majority of deal activity; however, it only accounted for less than 20% of this year’s proceeds on US exchanges, based on Bloomberg data.
This trend appears poised to change as success stories gradually emerge.
Companies like Reddit Inc. and Astera Labs Inc. have distinguished themselves with noteworthy debuts this year. Recently, ServiceTitan Inc. set its IPO price significantly above an already inflated range, and its shares rose by 42% on its first trading day.
Read: Arm, Reddit, and Astera performance demonstrates strength in AI IPOs
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Several firms planning IPOs in the first half of 2026 are now aiming for the latter half of 2025, inspired by the robust stock performances of companies like ServiceTitan and OneStream Inc., as noted by Paul Abrahimzadeh, Citigroup Inc.’s co-head of ECM for North America.
“There’s a palpable sense of momentum within the venture community,” Abrahimzadeh stated. “In conversations with VCs on the boards of private firms, everyone is eager to move forward; they want to show LPs they are returning capital and generating gains.”
Valuations
It’s beneficial that investors are showing adaptability regarding valuations given the expectations from the pandemic era.
“We’re starting to see a willingness among companies to accept down rounds during IPOs,” noted Keith Canton, JPMorgan’s head of Americas ECM. “These down rounds aren’t influencing IPO trading performance, encouraging sponsors and management teams to outset the process.”
“We expect to enter 2025 with a highly dynamic US IPO market—significant sponsor exits, a rise in consumer and tech assets, and a fintech pipeline that hasn’t been this developed in years,” expressed Daniel Burton-Morgan, head of Americas ECM syndicate at Bank of America Corp.
Swedish digital payment company Klarna Group Plc is leading the way, having confidentially filed for a US listing in November.
Additonally, fee-free fintech company Chime Financial Inc. is also preparing for a 2025 launch, as reported by Bloomberg News here.
The rising potential of deregulation in the crypto space has rekindled interest in potential launches within this sector, including Circle Internet Financial Ltd. and trading platform eToro.
Read: Crypto volatility surges as Trump-driven rally begins to lose steam
Not everyone lamented the temporary decline of the technology sector’s prominence.
“We have seen a genuine diversification in the sectors propelling the IPO market this year,” claimed Morgan Stanley’s global co-head of ECM Eddie Molloy.
A promising 2024 ahead
With the market anticipating interest rate cuts, and Trump indicating he has no plans to replace Fed Chair Jay Powell, many look forward to a successful year ahead.
“With macroeconomic stability, the elections behind us, and a market environment appearing conducive for capital market growth,” stated Elizabeth Reed, global head of equity syndicate at Goldman Sachs Group Inc.
“These are the indicators we are collectively monitoring, and we feel optimistic about an uptick in activity as we approach 2025.
The anticipated lower interest rates, combined with a Trump administration viewed favorably for mergers and acquisitions, could drive companies and private equity firms towards more aggressive acquisition tactics. This might lead aspiring public companies to consider swift sales as an alternative, according to Jill Ford, co-head of ECM at Wells Fargo.
“While the IPO market shows signs of rejuvenation and return, it hasn’t fully grasped the opportunity yet. Therefore, it’s vital to approach every process with a dual strategy, since it’s plausible these companies might opt for M&A pathways,” Ford expressed in an interview.
“This is especially applicable given a relaxed regulatory environment and solid balance sheets in conjunction with a robust currency.”
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It remains difficult to predict which elements of Trump’s campaign policies will materialize during his tenure, but with numerous financiers poised to take roles in his administration, many believe he will not overlook Wall Street’s concerns.
“It’s likely that everyone feels it’s too early to determine how much of the campaign narrative will come to fruition,” noted Tom Swerling, global head of ECM at Barclays Plc. “The market appears to be leaning towards a positive interpretation of the prospective benefits of a Trump presidency.”
© 2024 Bloomberg
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