IPO Market: Why 2025 is Poised for a Resurgence After Years of Stagnation

SPACs and Animal Spirits Led to Covid IPO Mania

After reaching a peak in 2021, the initial public offering (IPO) market has been stagnant. In 2020, the number of IPOs was 480, and in 2021, the number of new offerings exploded to 1035. The reason behind the explosion in new stock offerings was due to an ‘animal spirit’ market environment spurred on by basement-level interest rates, government stimulus checks, and robust market performance. Meanwhile, many companies went public in the second half of 2020 and early 2021, having delayed their IPOs due to macroeconomic concerns caused by the pandemic. In addition, the stay-at-home trend led to the rapid growth of digital and online businesses like telehealth, cybersecurity, e-commerce, and streaming services, prompting management teams to take them public.

The rise of SPACs (Special Purpose Acquisition Companies), also known as ‘blank check companies,’ helped to increase the IPO count and Wall Street’s speculative, risk-on fervor. SPACs utilize the IPO process as a means to raise capital for the acquisition of a private company. During the immediate post-COVID timeframe, the number of SPACs doubled, and their share prices increased rapidly (at first) as well. However, with little fundamentals, sky-high valuations, and speculative retail investments, the IPO SPAC bubble eventually burst.

Why Has the IPO Market Been Stagnant Since COVID?

The poor performance after the initial SPAC jolt likely set the IPO market back for years. With higher inflation in 2022 came higher interest rates and a more challenging path to going public. In addition, macro concerns and a tighter regulatory environment meant that more companies remained private. From the peak of 1,035 IPOs in 2021, the number of IPOs in 2021 was 181, 154 in 2023, and 225 last year.

2025: The Rebirth of the IPO Market

Year-to-date, there have been 161 IPOs in the United States. Should the current trend continue, 2025 will mark the most robust IPO market since 2021. What’s behind the rebirth of the IPO market?

·       Innovations Lead to Hyper-Growth Industries: Industries such as artificial intelligence and digital assets have transitioned from pipedream to reality in 2025, amid rampant adoption and investment.

·       Regulatory Thawing: The Trump administration is seen by Wall Street as more favorable from a regulatory perspective. For example, the administration is backing “The GENIUS Act,” finally providing a regulatory framework and clarity for the stablecoin business.

·       The IPO Domino Effect: Often,management teams will wait to see how other companies do before going public. Because companies like Coreweave (CRWV) and Circle Group (CRCL) have experienced so much price appreciation since going public, other companies are more likely to follow suit and pull the trigger.

Though many 2025 IPOs have been successful, not all have been. For instance, Newsmax (NMAX), a right-leaning media company, shot from $15 to $265 before completely roundtripping the gains.

IPOs to Watch for the Remainder of 2025

IPOs are the lifeblood of the stock market, and when the market is healthy, they can provide investors with investment opportunities in hyper-growth market areas such as fintech, digital assets and artificial intelligence. Two stocks to watch in the digital assets and fintech space are Cantor Equity Partners (CEP) and Chime Financial (CHYM). CEP is a SPAC used to acquire Bitcoin, and Chime provides a mobile-first banking solution. In addition, financial infrastructure platform Stripe is rumored to be considering an IPO in 2025. Here are some other potential IPOs rumored to be going public this year:

Klarna: A leader in the ‘buy now, pay later’ space.

Discord: A popular chat and communication platform.

StubHub: The leading ticket resale marketplace.

Bottom Line

After a multi-year drought, the US IPO market is reborn in 2025. More companies are going public and performing well, offering fruitful opportunities for growth-oriented investors.

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This article originally published on Zacks Investment Research (zacks.com).

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