After two years of limited IPO activity, investors are looking for signs that the U.S. IPO market may be up for a revival in the Trump presidency. Since Trump’s win, stocks in major investment banks such as Morgan Stanley MS, Goldman Sachs GS, JPMorgan JPM and Jefferies JEF have all surged.
Similarly, closed-end funds like the Destiny Tech100 (DXYZ)—which invests in companies like SpaceX, OpenAI, and Stripe—are also seeing large rallies, suggesting that investors are increasingly betting on a revival in IPOs.
The trend puts focus on exchange-traded funds (ETFs) like Renaissance IPO ETF IPO and First Trust US Equity Opportunities ETF FPX. While IPO ETF was off 0.2% past month, the FPX ETF was up 6%.
Increased IPO Activity Likely in 2025?
Jay Ritter, a University of Florida professor specializing in IPOs, expects a rise in U.S. IPO activity over the next year, barring any significant downturn in the stock market, as quoted on Yahoo Finance. Ritter attributes the likely uptick in IPO activities more to the recent stock market momentum than to anticipated policy changes under Trump, which may include lower corporate taxes and regulatory easing.
IPOs Show Signs of Life Despite Lingering Uncertainty
The IPO market has shown modest improvement, with 193 IPOs this year—the highest count since 2021—though still below the decade’s average of 290 per year. Following a peak in 2021, when more than 1,000 companies went public, IPO volumes dropped sharply, with only 179 in 2022 and 148 in 2023, largely due to rapid Fed rate hikes.
Stock Market Rally Fuels Optimism Among Market Strategists
Since the election, Wall Street rallied on Trump trade hopes. Julian Emanuel, head of equity strategy at Evercore ISI, projects the S&P 500 could reach 6,600 by mid-2025, driven by a "public reengaged in speculation," a trend that often coincides with increased IPO activity, as quoted on Yahoo Finance. Emanuel believes the anticipated "exuberance" could fuel IPO momentum, especially around AI-focused companies.
Goldman Sachs' IPO Issuance Barometer Signals Positive Outlook
Goldman Sachs’ IPO Issuance Barometer, which factors in variables like S&P 500 performance, CEO confidence, and 2-year Treasury yields, currently stands at 137, well above the 100-point threshold that signals a supportive environment for IPOs. Investors should note that despite the positive market backdrop, reluctance from private equity and venture capital to lower valuation expectations is now stalling IPO activity.
Notable Movement: Klarna Files Confidentially for IPO
Adding to the signs of renewed activity, Swedish fintech company Klarna, which saw a meteoric rise to over $40 billion in 2021 before plummeting below $10 billion the following year, reportedly filed confidentially for an IPO, according to the Wall Street Journal. This step may signal the beginning of a more active IPO pipeline as market conditions continue to improve.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
