IPO Market Forecasts

Are we due for another IPO boom in software? Taking a trip down memory lane here.. From 2014 to 2021, software-specific IPOs (not just general tech) were popping up like weeds in my neighbor’s unkempt lawn – 7 to 10 a year. By 2021, we were drowning in almost two dozen of them. But lately? It’s been deader than disco. We’re lucky if we get one a year. So, what’s the deal? Some folks are yammering that 2025 is gonna be the second coming, maybe even topping 2021. Why? Here’s the scoop: First off, we’ve got a ton of companies with over $500M in ARR and metrics tighter than my old jeans. The downturn gave them a good smack of financial discipline. No one’s impressed by your 100% growth if you’re setting money on fire. Now, a strong financial profile and high gross margins? That’s the new hotness. Free cash flow over 30%? Now we’re talking. Second, there’s this pent-up demand. Companies like CoreWeave and Anthropic are pulling in around a billion in revenue. They can keep cruising on private IPO financings, but Wall Street’s practically on its knees begging them to go public. Think Wiz and a whole army of other category winners north of $500M. But here’s what’s missing: deep tech and clean tech. Yeah, it’s a bummer, but those guys are nowhere to be found in the IPO pipeline. Also companies like Stripe are opting to stay private. Will be interesting to see if pivot and go for a massive raise and IPO once rates come down and their valuation goes over $100B+ And let’s not kid ourselves – a regime change in the US is on the horizon. Activist regulators like Lina Khan might be packing their bags soon, which means big M&A deals might finally get the green light. But hey, what do I know? I just read stuff on Twitter. Let’s see how this circus unfolds.

2025 is off to an optimistic start for the deals market. Wall Street is preparing for a wave of initial public offerings as Private Equity firms seek to capitalise on strong U.S. equity markets to exit flagship investments. Companies like Medline Industries, LP and Genesys have already filed IPO paperwork, with more announcements expected in the first half of the year. The revival follows a strong 2024, where 9 of the 10 largest IPOs ended above their listing price, including Reddit, Inc.’s blockbuster debut, which achieved triple-digit gains. Optimism is fuelled by Federal Reserve rate cuts, a pro-business regulatory outlook, and the broader strength of U.S. stocks, which have surged nearly 70% since 2022. Private Equity-backed IPOs are set to dominate as firms face pressure to return cash to investors after a prolonged dealmaking drought. The focus has shifted from speculative startups to established companies, reflecting lessons learned from the overheated market of 2021. Investors now favour larger, more stable businesses with strong profitability, making Private Equity-backed IPOs particularly appealing. Source: Financial Times

Are Tech IPOs recovering? 📈 I recently shared my views on the #Tech #IPO market with S&P Global’s Iuri Struta, including our expectation for a rebound to more normalized IPO activity, which would benefit broader Tech M&A activity. Here are some key highlights from the article along with some of my own views on what implications an IPO rebound may have for the broader Tech M&A landscape: ▶️ Tech IPO market recovery: The IPO market is expected to recover in 2025, returning to pre-pandemic levels due to improving conditions such as lower interest rates and a shift in investor focus toward small- and mid-cap companies. ▶️ Historical context: Tech IPO activity peaked in 2021 with 215 tech IPOs that year, but collapsed afterward, with only 25 tech IPOs reported in 2024 through December. ▶️ Dual Track IPO / Exits: A more normalized IPO market allows tech companies to explore dual track IPO / M&A processes which increases odds for a successful exit. ▶️ New IPOs Spurs Strategic Acquisitions: IPOs create a new set of companies with clear valuation trading multiples and acquisition currency (both cash and publicly-traded shares) with their own acquisition gameplan. This increases the buyer universe for promising middle market tech companies seeking exits to strategic players. At Drake Star, we and our clients have been operating with a view that the IPO markets are essentially closed. But more recently, we’ve seen IPOs floated as an exit scenario a bit more. IPO windows have been open and closed periodically; very robust IPO windows tend to be open for quite brief periods of time. We are not looking for a boom or spike in 2025, but more a normalized IPO activity. 👇🏻 For the full article, follow the link in the comments below.

One year on from its IPO on Nasdaq, the UK microchip designer Arm is valued at a cool £111 billion. If it was a #FTSE100 constituent it would be the fifth largest, eclipsed only by AstraZeneca, Shell, Unilever and HSBC. It’s important to look forward as London’s capital markets reform continues – and the recent Financial Conduct Authority listing rules changes are a tangible leap - but let’s not forget the One That Got Away. Too often the matter of attracting and keeping the best companies trading here is depicted as a top-down problem, an international battle between London, New York and Amsterdam. And to a degree it is. But if London wants to thrive as the home to more public companies of scale, it must apply some bottom-up solutions, some distance from the FTSE 100. That means: Building on existing, highly successful tax incentives, such as AIM business relief, EIS and VCT, that unite patient capital with growing businesses; Aligning billions more invested in UK pensions with smaller UK companies which have suffered most as liquidity has declined; Encouraging retail investors to try shares over cash more often; Making it easier for companies to connect with their ultimate owners and run stock incentive plans for their employees; Cutting stamp duty on share trading, a tax currently levied at the highest rate anywhere in the world other than Ireland; Devising solutions to soaring audit costs and uncommunicative proxy advisers. The Quoted Companies Alliance is busy on all these fronts, championing tomorrow's blue chips. #cityoflondon #publicequity #growthcapital #midcaps #smallcaps #microcaps #investment #wealthcreation #ukeconomy #ipo #ftse London Stock Exchange Aquis Stock Exchange CMIT - Capital Markets Industry Taskforce

Cautious Optimism or a Reality Check? The total value of U.S. IPOs is up 62% from last year, hitting $10 billion by mid-March. The number of deals has nearly doubled, signaling that companies are still willing to test the waters. But while these figures are an improvement, they are well below the heights of 2021 and still lag behind the decade’s average. Investors are looking for a defining moment; a deal that shifts sentiment decisively. Tech companies like CoreWeave and Klarna are eyeing public debuts in the second quarter, but those plans remain at the mercy of shifting investor sentiment. Venture Global Inc., for example, saw its stock tumble nearly 60% after its January listing, far from the strong debut the market hoped for. CoreWeave, an AI-focused cloud provider with deep ties to Nvidia and OpenAI, could be that deal. The company is targeting a $4 billion raise and a valuation north of $35 billion. If successful, it could set the tone for a stronger IPO cycle. At the start of the year, the outlook for IPOs was optimistic. Now, the mood is more measured. With regulatory uncertainty, economic headwinds, and investor caution, the coming months will determine whether this IPO market gains traction or remains in limbo.

Despite the ambitions of the Financial Services and Markets Act 2023 to reinvigorate UK capital markets, the numbers tell a different story. According to the FT, London continues to fall behind global rivals in attracting major IPOs. High costs, regulatory inertia, and an ecosystem that still feels risk-averse have made traditional listings unattractive - especially for high-growth, innovative firms. While the US and Middle East are securing landmark floats, the UK IPO pipeline is alarmingly thin. And with the average cost of an IPO in London still weighing heavily on founders and boards, the gap may only widen. If the UK is serious about being a global financial hub, it must go beyond rhetoric and deliver reforms that genuinely lower barriers and reduce friction in going public. 📉 FSMA 2023 talked about competition for growth. 📈 But without more competitive, founder-friendly listing options - it risks being just that: talk. What will it take for London to win again? #IPO #UKFinance #CapitalMarkets #FSMA2023 #FinancialServices #LondonListings #PublicMarkets #StartupFunding #SPACs #GrowthEconomy #RegulationReform

With a gradually improving macroeconomic landscape, growth in equity indices, and a backlog of pent up demand for new investments, it appears that investor sentiment turned more positive towards the end of 2023 and is cautiously optimistic for 2024 according to our latest Global IPO Watch report  https://pwc.to/44nDruc . So, if the current mood suggests that we are entering a year where there is hope for IPOs to make a comeback, it seems to me that some sectors could well be the cornerstone of potential re-opening of Western IPO markets. In fact, our recent Make UK survey shows that UK manufacturers are taking active steps in preparation of an improved set of conditions. They believe that opportunities now outweigh risks, and as a result we are seeing the green shoots of expansion plans. This includes venturing into new territories and product lines indicating that acquisitions could well be on the agenda as a means of expansion. And it is not only in IPOs that we are seeing the potential for an expansion of creative energy. Our research into M&A activity also shows that despite economic headwinds seeing the number of deals completed in 2023 fall, there remains measured confidence. In fact as Lucy Stapleton, my colleague and our Head of Deals puts it, despite the macroeconomic environment being still challenging, overall, we are in a much better place than we were a year ago with inflation steadily falling and while interest rates are still higher than recent times, they have stabilised. In a year where achieving and sustaining growth is on the agenda for CEOs and policymakers alike, an uptick in IPOs and a recovering M&A market can only be a positive development. This cautious optimism is proving to be justified, with some of our industries leading the charge, in fact, our research showed that for UK deal activity the Technology, Media and Telecommunications (TMT) saw the most activity. And for 2023 Energy, Utilities and Resources saw the highest deal value. As we step into 2024, the interplay of optimism and caution shapes the landscape for IPOs and deal-making. And I believe that a number of industries and sectors will have an important role to play in ensuring that this momentum turns into a pipeline of opportunities. There are as many bears as there are bulls. Let me know in the comments whether you are bearish or bullish for your industry or sector when it comes to the opportunity for deal-making in 2024. #PwCUK #IndustryInFocus #Business #markets #IPOs

The UK government will announce plans for a "world first" private stock market, known as Pisces, to boost its dwindling IPO activity. Chancellor Rachel Reeves will propose legislation in May 2024 to establish Pisces, the Private Intermittent Securities and Capital Exchange System, where private companies can trade shares periodically. Pisces aims to serve as a “stepping stone” for companies considering public listings, while allowing investors opportunities to sell stakes in private firms. The platform will enable companies to control trading intervals and buyer selection, offering a flexible, regulated market environment. This comes as London's IPO numbers have been historically low, with only 12 listings raising £450 million in 2023. Amid challenges from firms choosing New York for its larger capital base, Pisces is designed to strengthen the UK's capital markets. The London Stock Exchange’s planned Intermittent Trading Venue will align with Pisces, while other exchanges may develop similar markets. On the surface, it offers the best of both worlds: liquidity opportunities for existing investor and employee shareholders, enhanced new investor protections, reduced disclosure requirements, and the chance to open their shares up to new audiences. All combined with the ongoing ability to continue to trade in the private markets where they can continue to facilitate share buybacks and capital raising through issuing new shares. Some, however, are skeptical, arguing that Pisces might deter IPOs further by allowing firms to avoid the rigors of public listing.

Our data shows that more investors are interested in both older (10+ years old) and younger (less than 5 years old) private companies than in the past. Younger companies saw an increase in investor interest, more akin to the interest we saw for companies of this age at the height of the market in 2021 and 2022. Much of this demand was driven by investor interest in AI companies. Since AI is still an emerging technology, many of these companies are inherently earlier in their lifecycle. On the other end of the spectrum, interest in older companies was likely driven by the expectation of more IPOs over the next several quarters. Many later-stage, mature companies have both liquidity and strategic reasons to pursue an IPO, and private market investors see these companies as the “IPO hopefuls” that could enter the market in the near term. Tying back to the AI trend, the most likely IPO candidates sit within the AI infrastructure and cloud space—think chips and data storage. These companies are building the infrastructure required for AI technology to be widely adopted. Clearly, there is love in the air for the old & the young. Insights: EquityZen data

Quick recap of the PitchBook Q1 2025 IPO Expectations report - my longer overview coming soon. The State of VC-Backed IPOs: A Slow Recovery Ahead Despite a strong public market, VC-backed IPOs remain sluggish, hitting their lowest levels since 2011. Only 40-42 IPOs per year were completed from 2022 to 2024, compared to 193 in 2021. High valuations, risk-averse investors, and macro uncertainty are key barriers. While some companies like Reddit and Astera Labs performed well post-IPO, half of non-healthcare unicorns in 2024 priced below their last private valuation, highlighting pricing mismatches. Why 2025 Could See a Moderate Rebound • Rate Cuts: Expected Fed reductions could improve investor sentiment. • Liquidity Pressures: Late-stage startups need capital, and secondary financings are scarce. • Strong Public Market: The S&P 500 gained 23.3% in 2024, creating a better IPO window. However, recovery will be slow. The Fed remains cautious, and investors now prioritize profitability. Tech IPOs that once traded at 20x+ revenue multiples now struggle to sustain 6x. The Growing IPO Pipeline After three years of low IPO activity, 601 startups now meet historical IPO benchmarks, up from 288 in 2021. AI, fintech, and healthtech lead the list, but valuation compression remains a challenge. Notable IPO candidates include: • StockX ($3.8B) • GrubMarket ($3.6B) • Indigo ($3.95B) • Zocdoc ($1.8B) Many unicorns may need down rounds or secondary sales before going public. IPO Forecast for 2025 • H1 2025: ~21 IPOs expected. • H2 2025: 30-40 additional IPOs if rate cuts materialize. • Full-Year Projection: 51-61 IPOs—better than the past three years but far below pre-2022 levels. A best-case scenario would see ~75 IPOs, improving VC liquidity but still short of 2021’s surge. Key Takeaways for Investors & Startups • VC-backed IPOs will increase but won’t return to past highs. • Down rounds and valuation cuts will be common. • AI, fintech, and healthtech startups dominate the pipeline but face fierce competition. • LPs are pressuring VCs for liquidity, forcing some startups to go public prematurely. • Rate cuts and economic strength could drive a moderate rebound, but uncertainty persists. For startups eyeing an IPO, the bar is now higher than ever. Investors demand real fundamentals—growth alone won’t cut it in this new era.