The 2024 IPO class has seen strong performance, with over 85% of these IPOs pricing within or above their initial marketing price ranges. This comes after a rise of over 20% in the value of IPOs from issuance to year-end, with larger IPOs showing an aftermarket performance of nearly 30%. The growth in investor demand for IPOs has led to further IPO issuance.
The economic outlook has improved, with recessionary fears diminishing as GDP forecasts exceed 2% for 2025 and 2026. The probability of a recession in the next 12 months has declined to 20%, down from 65% at the end of 2022.
The market recovery is broadening beyond large tech companies, reaching various sectors and market segments. This trend is driven by investor confidence in US equities, which attracted $176 billion in net inflows from mid-October to early December 2024. Hedge fund assets have also reached record highs, highlighting the market’s liquidity.
Private equity and venture capital are poised to drive further IPO activity, with a backlog of aging portfolio companies and an attractive exit strategy for these investors. The adoption of generative AI and large language models is attracting significant capital in private markets, but public markets will be better suited to finance longer-term development and deployment.
The M&A environment is expected to become more accommodative under the new US presidential administration, making it easier for companies to scale ahead of a public listing. This could lead to increased IPO activity as companies prepare to go public earlier than expected.
Source: https://www.ey.com/en_us/insights/assurance/ipo-market-in-2025