Wall Street is gearing up for a resurgence in initial public offerings (IPOs) as private equity firms including Blackstone, Carlyle, and Hellman & Friedman look to capitalise on buoyant US equity markets to offload investments, according to a report by the Financial Times.
With investor confidence bolstered by strong stock performance in 2024 and optimism about pro-business policies under president-elect Donald Trump, the IPO landscape is poised for significant activity in 2025.
Private equity-backed companies, including medical devices firm Medline and software maker Genesys, have already filed for IPOs, with more announcements expected in the first half of the year.
The revival follows a challenging three-year period marked by Federal Reserve rate hikes that curbed investor demand for high-risk and growth-focused assets, including newly-listed companies. However, a series of rate cuts in late 2024 has renewed investor appetite.
The US IPO market raised $32bn in 2024, excluding special purpose acquisition companies (SPACs), up nearly 60% from the previous year, according to Dealogic. While this remains far below the pandemic-era IPO peak of $150bn in 2021, bankers are optimistic that 2025 activity could surpass the pre-2020 average of $38bn.
The success of recent IPOs has further fuelled confidence. Shares in nine of the 10 largest IPOs of 2024 ended the year above their listing price, with social media platform Reddit leading the pack with triple-digit gains.
Private equity firms are under pressure to return cash to investors after an extended dealmaking drought. This has prompted a shift toward larger, more profitable companies that appeal to public market investors, in contrast to the loss-making startups that dominated the IPO frenzy of 2021.
The fintech sector is expected to play a central role in the IPO resurgence. Swedish “buy now, pay later” giant Klarna is anticipated to be one of the first venture-backed companies to test the market, while, San Francisco-based mobile banking platform Chime has renewed plans to go public after initially targeting an IPO over two years ago.
Chime previously discussed a valuation of $15bn to $20bn, though strong gains in tech and financial stocks since last year’s US election could push its valuation higher.
