The IPO Prophet's Perspective - The Week of February 17th, 2025

Stability Before Velocity: Assessing the 2025 IPO Market

It has been a long, slow ride from the post-2021 collapse in IPO activity to where we are today. For those of us deeply entrenched in the IPO market, the pull has been strong to look forward to the days when new, innovative companies steadily march into public markets. Last summer, we wrote that the complete IPO embargo was coming to an end—a true and timely call. But we never expected a sudden floodgate of exciting companies rushing to market with immediate, capturable alpha. Whether in sports, engineering, or even driving, the same principle applies: before velocity, you need stability. That certainly holds true for this IPO market, and we believe that’s a good thing. With this in mind, let’s assess where we stand with the 2025 cohort of offerings and consider the pre-existing conditions still working themselves out and key factors shaping this next phase of the market’s recovery.

Rebuilding the IPO Ecosystem

A well-functioning IPO market relies on three key players—issuers, investors, and underwriters—whose interests are usually aligned. Issuers seek access to capital at strong but fair valuations. Investors want predictable pricing and confidence in long-term appreciation. Underwriters act as intermediaries, ensuring healthy deal flow.

However, the market breakdown post-2021 introduced new complications that are still being worked through. These disruptions have influenced both the nature of 2025’s offerings and their performance thus far.

• Issuers have faced a challenging recalibration, reconciling past valuations with new market realities while managing cash flow constraints. Many have delayed their IPOs, waiting to see how the first movers fare.
• Investors are also in wait-and-see mode, looking for signals from early deals before fully committing.
• Underwriters play a crucial role in restoring confidence. While they aren’t necessarily orchestrating a grand comeback, their ability to successfully bring large offerings to market is reassuring for issuers and investors alike.

This year’s IPO pipeline reflects that dynamic. Historically, offerings from venture capital- and private equity-backed firms struggle in uncertain environments. Yet, major deals like SailPoint Technologies, Karman Holdings, Smithfield Foods, and Venture Global have cleared the market successfully. Whether due to underwriters’ influence or broader sentiment shifts, these transactions suggest the IPO market is stabilizing.

 Where We Stand Today

The following chart illustrates that this recovery is underway. The rolling 12-month issuance data shows a clear rebound in 2024, despite late-year disruptions from election uncertainty and seasonal effects.

 This data underscores our thesis: the IPO market is regaining stability before it can build momentum.

A Market of Large, Muted IPOs

 So far, 2025’s IPOs have been defined by larger deal sizes, subdued premiums, and muted aftermarket performance.

• Nearly half of this year’s offerings rank in the top 25% of IPO sizes since 2012, with multiple deals in the top 5%.  This aspect is clearly a positive for the IPO market on the whole but implicitly impacts our expectations of how these deals perform.
• First-day trading has been weaker than historical norms—over 60% of 2025 IPOs rank below the 30th percentile in opening premium since 2012.

This pattern suggests that while the IPO window is open, the types of companies entering it are skewed toward large, established issuers rather than high-growth startups

Aftermarket Performance: A Digestive Phase

The following chart captures this reality—larger IPOs tend to take time to be absorbed by the market, which explains the lukewarm aftermarket performance so far.

This isn’t necessarily a negative. In fact, it reinforces our central theme: before velocity, we need stability. Large deals anchoring the market today pave the way for more dynamic offerings in the future. If history is any guide, once investors digest these larger transactions, the door will open for smaller, higher-growth IPOs to thrive.

Final Thoughts

While 2025’s IPO landscape may not be the breakout year we expect - yet! These offerings are laying the groundwork for more exciting things to come.  This shows stability now let's look toward some velocity.

 -The Prophet's Perspective

 IPO Prophet’s value lies in our proprietary signaling process. We analyze Initial Public Offerings using a suite of algorithms refined over the past 20 years. The table above highlights all IPOs in 2024 where IPO Prophet has generated a Bull Signal, demonstrating returns based on our signals and subsequent performance since the opening trade. While our indicators can be applied to longer-term positions, the data above reflects only the first day’s performance, as our signals are designed specifically for issuance day, with positions marked to market at the close of the IPO’s first trading day. To learn more about our process, here.