Lisya Bahar Manoah, Managing Partner at Arieli Group.
Market uncertainty is slowing IPO activity, with many offerings being canceled or paused in April. However, I think the strong start to the year, before the market tumbled, leaves room for optimism. After all, the year started with many signs indicating that 2025 could be a strong comeback year for initial public offerings.
Although the market selloff in April has led to softer expectations for IPOs in 2025, many of the positive underlying factors remain unchanged, showing that a turnaround could be possible.
This comes partly from favorable economic policies, including potential deregulation and tax reforms. The new administration in Washington has proposed a series of tax cuts, and the government has shown that tech—especially AI—is a priority for support and even funding. With tech generally dominating the IPO market, especially on the Nasdaq, there are still many reasons for companies to issue their own shares.
What The Numbers And Patterns Tell Us
The first quarter of the year, with 15 IPOs raising more than $7.9 billion, was the strongest start to a year since 2021. Even amid the market slowdown in April, many companies have filed for planned IPOs. About half of Nasdaq companies are in tech fields, and that trend seems likely to continue, with companies like Databricks potentially filing this year or next, and CoreWeave’s shares jumping beyond their initial pricing days after its early April IPO.
The fact that IPOs remain relatively strong in such a volatile market highlights the three-year cycle that IPO waves often follow. These waves are often preceded or accompanied by an uptick in M&A activity.
For example, 2021 was a record year for IPO exits, with the Nasdaq seeing 753 companies offering investors shares in newly listed companies that year. And 2021 was also a record year for mergers and acquisitions among U.S. companies, with over 25,000 such deals. Just two years later, IPOs fell out of favor, with only 125 companies going public. In 2024, we saw the IPO market revive somewhat, with 171 IPOs on the Nasdaq.
Looking At The Big Picture When Navigating Choppy Waters
However, given the current uncertainty regarding several economic issues, especially a potential increase in inflation and slowdown in growth, both entrepreneurs and investors should think carefully about IPO activity, including not rushing to delay or cancel their plans.
I think both companies and investors should not lose sight of the fact that many market fundamentals remain positive. This lends some favorable momentum to share prices and potential IPO pricing. For example, rate cuts are expected to continue, with the U.S. Federal Reserve expected to make between three and five rate cuts, according to analysts. Once a clear policy direction emerges regarding trade or other issues, I think it is reasonable that the uncertainty, too, will fade.
As Jack Cassel, senior vice president at Nasdaq, recently said, “Any uncertainty will lead to a tighter IPO window, but once we have more certainty on [US government] policy we will see lots of investors trying to generate IPOs.” He added, “The fundamentals for companies have not changed.”
Understanding Essential Sectors
The current market presents an opportunity for investors to assess not only a company’s IPO potential but also the broader health of its sector. For example, cybersecurity remains a strong IPO contender as cyber threats rise, with Cato Networks and Netskope expected to go public. Fintech is also expected to supply some top IPOs, possibly including financial services firm Brex. The health and biotech sector is also expected to supply IPO action, with companies like Hinge Health, Omada, Metsera and several device makers expected to file.
A unifying theme across these fields is the growing need for solutions that tackle critical global issues, bolster security and protect lives. As a result, certain sectors may offer more stability than others, especially in a time of uncertainty. This reasoning applies even to those companies not considering IPOs; in fact, regardless of whether a company is considering an IPO or M&A, the fact that it belongs to a sector essential to future growth and development could improve its chances for success and investor returns.
Prioritizing Readiness
I think it’s a good idea for the companies planning or considering IPOs to prioritize readiness and flexibility. This includes meeting investor criteria like showing the ability to scale, grow, make a profit and operate according to a well-established structure.
In a market that can turn in an instant, being prepared can help companies to take advantage of market opportunities that arise, as well as be more attractive to investors who may be carrying out extra due-diligence or operating with more caution. The ability to innovate and adapt to the current market is also a strong point, and being able to prove this to investors can raise a company’s chances of raising money or being able to issue shares.
The wave of IPO delays and cancellations may seem alarming—particularly in a quarter once viewed as highly promising—but it doesn’t need to spell doom for all IPOs. In fact, the fundamentals of many companies—and the broader economy—remain intact.
We are also still on the heels of a period of increased M&A activity, which has often preceded IPO recoveries. I think that what’s primarily driving the current slowdown is uncertainty, not a deterioration in underlying strength. However, with the right steps, both entrepreneurs and investors can navigate the uncertainty in a way that sets them up for future growth.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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