IPO Blowout Forecast for 2025 Threatened By Trump Tariffs
Bailey Lipschultz and Ryan Gould
7 min read
(Bloomberg) -- Stock markets have been cheering the return of Donald Trump and shrugging off the prospect of tariffs that he’s long promised to impose on America’s biggest trading partners.
IPO bankers, who for months have been helping companies gear up for what’s expected to be a standout year for debuts, have a humble plea for the president-elect: Could he just stay out of the market’s way?
Even after a year in which volume has jumped more than 60% versus in 2023, US initial public offerings are still recovering from a streak of interest rate hikes that slammed the door on pandemic-era stimulus and triggered a stock market correction. While the exact timing for a return to normal is up for debate, all eyes are on 2025, so long as the incoming administration’s policies don’t throw cold water on it.
“The biggest risk is it creates unneeded volatility in the market as a whole,” said Clay Hale, co-head of equity capital markets at Wells Fargo & Co. “When there’s volatility in the market and investors are focused on their portfolio, they’re less likely to want to engage in adding a company from the private markets.”
Taking a company public has been compared to steering an aircraft carrier: It takes time to get documents in order, engage with investors and clean up the balance sheet. With volatility mostly absent for the better part of a year, dealmakers have had time to prepare for marquee listings like CoreWeave, Medline Industries Inc. and Genesys Cloud Services Inc. that may raise single-digit billions of dollars.
A flurry of large deals next year could blow past the $43 billion raised through first time share sales this year on US exchanges, data compiled by Bloomberg show.
Still, even with markets hanging near record highs amid expectations of a strong economy and more growth on the horizon, “some uncertainty still lingers,” according to Kevin Foley, JPMorgan Chase & Co.’s global head of capital markets.
“There’s optimism that the new administration will bring deregulation and reduce inflation, but tariffs are inherently inflationary,” Foley said in an interview.
Private Equity Dilemma
The return of sharply rising prices would force the Federal Reserve to rethink the interest rate path. That could worsen the dilemma for private equity firms with a logjam of companies to take public or sell sitting at nearly $3 trillion as of October, not to mention debt service costs that would likely keep rising.
“A lot of the activity will come from the private equity community,” said Arnaud Blanchard, global co-head of equity capital markets at Morgan Stanley, whose firm is working on a pipeline of buyout firm-backed deals. “But this isn’t a 2020 market, and it will still favor high-quality assets, where the amounts raised and implied market caps are not sub scale.”
Deal volume in 2025 may more than double the figure seen in the depths of the post-pandemic drought, if the biggest expected deals come to fruition, data compiled by Bloomberg show. That said, it isn’t a get-out-of-jail-free card for companies with problematic balance sheets.
“Some PE-backed deals will be for premium assets that are growing with scale and others will need to address leverage and find a valuation that can get buyers excited,” said Jimmy Williams, Jefferies Financial Group Inc.’s head of West Coast technology ECM. “For the latter, there’s a tension between what investors are willing to pay and what sponsors may be willing to accept for companies they’ve held for some time.”
Tech IPO Absence
The state of US IPOs can be measured by the relative absence of technology debuts since 2021. The industry typically accounts for the bulk of deal flow, yet it accounted for less than one-fifth of the proceeds on US exchanges this year, data compiled by Bloomberg show.
That’s finally set to change, after a slow drip of success stories.
Reddit Inc. and Astera Labs Inc. are among the best-performing debuts this year. Last week, ServiceTitan Inc. priced its IPO well above an already-boosted offering range and the share price jumped 42% on the first day.
Several companies that were weighing first-half 2026 IPOs are now aiming for the second half of 2025 instead, after seeing ServiceTitan and OneStream Inc. shares trading at a premium to peers, said Paul Abrahimzadeh, Citigroup Inc.’s co-head of ECM for North America.
“You can feel people gearing up within the venture community,” Abrahimzadeh said. “Talking to VCs on the boards of private companies, nobody wants to wait; they need to show LPs that they’re returning capital and crystallizing returns.”
It helps that backers have been showing flexibility on valuations reflecting pandemic-era assumptions.
“You’re starting to see a willingness of companies accepting down rounds in an IPO,” according to Keith Canton, JPMorgan’s head of Americas ECM. “A down round is not impacting how IPOs are trading, so sponsors and management teams are realizing it’s more important to get the process started.”
“We are going into 2025 with the expectation that we will see a very active US IPO market — big sponsor monetizations, more consumer and tech assets and a fintech pipeline that we have not seen as developed, for several years,” said Daniel Burton-Morgan, head of Americas ECM syndicate at Bank of America Corp.
Swedish digital payments firm Klarna Group Plc is leading the charge, filing confidentially in November for a US listing. Fee-free service-focused fintech Chime Financial Inc. is also heading for a 2025 debut, Bloomberg News has reported.
The potential for deregulation around cryptoassets has also renewed interest in possible debuts in the sector, including Circle Internet Financial Ltd. and trading platform eToro.
Not everyone lamented tech’s ceding of the spotlight.
“We have seen real breadth in the sectors that have driven the IPO market this year,” said Morgan Stanley global co-head of ECM Eddie Molloy. “Sometimes dominated by tech and health care, activity this year has been much more balanced,” he said, adding that he expects this to continue in 2025.
Banner Year
With the market pricing in rate cuts, and Trump saying he has no plan to replace Fed Chair Jay Powell, the default expectation for many is a banner year.
“Greater macro stability, the election behind us, and an environment seemingly ripe for more capital markets growth,” said Elizabeth Reed, global head of equity syndicate at Goldman Sachs Group Inc. “These are the technicals that we look at in aggregate and feel encouraged about increased activity heading into 2025.”
The lower interest rate environment paired with a Trump administration which has mostly been seen as a boon for takeovers could cause companies and private equity firms to be active acquirers. That could mean would-be public companies instead opt for a quick sale, according to Jill Ford, Wells Fargo co-head of ECM.
“The IPO market is getting healthy and returning but it’s not gangbusters just yet so you have to consider every process a dual track because it’s a very real possibility they’d go the M&A route,” Ford said in an interview. “Especially given an easing regulatory environment and healthy balance sheets alongside a strong currency.”
It’s hard to predict which of Trump’s policies on the stump will translate into action in office, but with so many financiers lined up to serve in his administration, many are betting that he won’t throw Wall Street under the bus.
“Everyone’s probably in the category of ‘it’s too early to tell’ in terms of how much of the campaign rhetoric is going to come to light,” said Tom Swerling, global head of ECM at Barclays Plc. “The market is choosing to look favorably to the likely upsides of a Trump presidency.”
(Updates with Goldman Sachs quotation in 26th paragraph.)
