Capital Markets 2025 outlook: PwC

IPO markets look primed to reopen in 2025

US public markets are gearing up for a 2025 resurgence driven by interest rate cuts, pent-up investor demand and a growing backlog of initial public offering (IPO) hopefuls.

There are more than 700 unicorns in the private market after three years of diminished IPO activity. Many IPO candidates, including some unicorns, have used this time to strengthen their finances and shift to sustainable growth models. Pressure also is building on private equity fund managers to return capital after a prolonged exit dry spell.

Some portfolio companies have already tested the waters with promising results. Three large sponsor-backed IPOs — a childcare center operator, an aviation maintenance provider and a global IT distribution and services company — priced in October. They posted an average return of 9% since debut. If this trend holds, it could encourage more sponsors to bring portfolio companies to the market.

The traditional IPO market continued its gradual comeback in 2024, with proceeds raised nearly 50% higher than in 2023 and nearly four times the amount raised in 2022. Activity was broad-based, with notable participation from sectors including technology, life sciences, consumer markets and financial services. Stock prices of this year’s traditional IPOs were up nearly 29%, outperforming the S&P 500, which rose by 26% year to date*— further highlighting the strength and investor interest in new offerings.

The recent US elections also provided investors with much-needed clarity on policy direction, lifting some of the uncertainty that had kept capital on the sidelines. The optimism was evident as the S&P 500 rose over 2% to record highs the day after the election. This strong reaction reflects investor confidence in pro-growth policies such as tax cuts and deregulation. The prospects for a soft landing, rate cuts in response to disinflation and surging AI investments also set a positive tone entering 2025.

Certain policies, like tariffs, could present challenges going forward. IPO activity also will depend heavily on continued economic stability and the Federal Reserve’s policy direction. While inflation has eased, the Fed is likely to proceed cautiously, and any unexpected shifts in monetary policy could prompt companies to delay IPO plans.

_{*Data from SEC filings and third-party databases as of 11/29/24}

Conversely, continued rate cuts and a predictable policy environment would likely boost investor confidence, creating more favorable market conditions. While PwC expects activity to pick up by mid-2025, the recovery may be more measured than in previous “open window” periods, as companies wait for stability in central bank policies and broader economic conditions under the new presidential administration. Additionally, deep pools of private capital may influence the pace of public market entries, as companies weigh the benefits of going public.

Successful IPO candidates in 2025 will likely be companies with solid business models and clear growth stories. Ideally, they will have a track record of profitability or a viable path to it. We view the IPO market as open for any company with appropriate scale, strong growth prospects and operational readiness to function as a public company.

Since market windows can open and close quickly, starting the preparation process well in advance is essential to better position companies for IPO success. Capturing investor interest will require a compelling equity story, especially in a market that favors long-term value creation over hype. Companies that effectively integrate AI into their business models — whether to enhance operational efficiency, drive product innovation or better serve customers — will have a distinct advantage.

For more mature, sponsor-backed firms, showcasing cash flow strength and a clear path to deleveraging will also be essential. Following recent trends, smaller floats and anchor investors may continue to feature prominently as companies manage risk in an evolving market environment.

As 2025 approaches, the US economy is expected to grow steadily, though more slowly than in 2024. PwC projects annual real gross domestic product (GDP) to grow at 2.7% in 2024, and moderate to 2.0% in 2025. Consumer spending remains strong, though relatively high borrowing costs continue to weigh on sectors like housing. While the Fed has begun cutting rates, it’s likely to proceed gradually, meaning interest rates may stay elevated into next year. PwC assigns a 60% probability to a “soft landing” scenario and a 20% chance to an optimistic “no landing”, both of which provide a supportive backdrop for IPOs.

"The 2025 IPO market is poised for a resurgence, driven by favorable policy changes, renewed investor confidence and a strong pipeline of companies ready to go public. While challenges such as economic uncertainties and potential regulatory shifts remain, we expect a dynamic year ahead, marked by increased activity and opportunities for growth. PwC is optimistic about the role of innovation and resilience in shaping a vibrant capital markets landscape in 2025."

— Mike Bellin, IPO Services Leader, PwC US

Year-in review – 2024

Markets surge amid volatility

Capital markets saw a strong recovery in 2024, even as periods of volatility followed a challenging 2023. US equity markets soared, with the S&P 500 rising 26% for the year*. A select group of companies contributed largely to these gains as investors increasingly focused on AI and related sectors, such as utilities, data centers and cloud computing. Despite a few notable pullbacks due to inflation concerns, Fed policy decisions and mixed economic data, markets quickly rebounded, driven by sustained investor optimism.

_{*Data from SEC filings and third-party databases as of 11/29/24}

IPOs stage a modest comeback

IPO activity saw a notable increase in 2024, with 61 traditional IPOs raising over $26.4 billion year-to-date — in line with the combined total number of IPOs in 2022 and 2023, which saw 28 and 35 IPOs, respectively. Despite this improvement IPO activity still fell short of early expectations and historical levels of activity, as many issuers opted to stay on the sidelines, waiting for a clearer economic picture or choosing to delay their IPOs until after the election. Small caps have generally underperformed the broader market, which may have kept some IPO hopefuls cautious until the market recovery broadens. Additionally, a valuation gap between private and public markets remains, especially for companies that raised private capital at high valuations during the post-COVID peak.
October saw a surge of traditional IPOs, with 11 companies pricing ahead of a shortened election window — a flurry of activity that marked the highest monthly IPO count since November 2021. These companies collectively raised $3.7 billion, as issuers sought to complete deals before potential policy changes.
A few notable IPOs are anticipated in the coming weeks, including an offering from a liquefied natural gas operator – set to be the second-largest of the year after a $5 billion third quarter IPO by a cold storage operator. Additionally, a software solutions provider for trade professionals is also expected to go public before year-end. Together, these offerings could close out 2024 on a high note, marking the strongest holiday IPO season since 2021.
Companies with AI-driven business models continue to capture investor interest, especially those that position AI as a driver of long-term growth. A well-known social media company has quadrupled in value since its debut in the first quarter, while a data center connectivity provider from the same quarter has nearly tripled since pricing. Both companies have benefited from compelling equity stories centered around AI-related demand, driven by the growing need for model training on unstructured content and increased demand for data center resources.
In 2024, sponsor-backed IPOs surged with 11 companies raising over $8.3 billion — an increase in proceeds of over 85% from the $4.5 billion raised by nine sponsor-backed IPOs in 2023 and far surpassing the $3.5 billion raised from three offerings in 2022. These 2024 sponsor-backed IPOs have delivered an average return of 42% since debut.
Venture capital (VC)-backed IPOs have seen a substantial increase in 2024, with 28 companies raising nearly $8 billion — well above the $4.2 billion raised from 17 VC-backed IPOs in 2023 and the $2.1 billion raised from 16 IPOs in 2022. This trend highlights growing interest in venture-backed companies with strong fundamentals and compelling equity stories.
Year-to-date, there have been 50 Special Purpose Acquisition Company (SPAC) IPOs raising $7.6 billion, an increase from 31 SPAC IPOs raising $3.5 billion in 2023 but far below 2022 levels, which saw 85 SPAC IPOs raising $11.9 billion. Meanwhile, de-SPAC merger completions have continued to decline, with 61 de-SPAC mergers completed year-to-date compared to 99 in 2023 and 102 in 2022. This decline reflects increased execution risks, stricter SEC regulations and decreased investor risk appetite for SPACs.

Venture capital deal value sees positive momentum

After bottoming out in 2023, venture capital investments saw momentum in 2024 due to rapid advancements in AI and machine learning. Fundraising and exit struggles remain challenges for the industry. However, there are reasons for optimism.

Dry powder remains near all-time highs despite the challenging fundraising environment of the last few years.
2024 saw a VC firm raise the largest fund in over two years. Limited partners are still willing to allocate capital to private markets, but are increasingly favoring established, name-brand general partners.
Most private market participants believe AI is the most pivotal technological shift since the cloud and are willing to allocate capital accordingly.
Startups have embraced an “age of efficiency” by becoming leaner and doing more with less — especially with AI productivity increases. This allows for more strategic use of investor capital.
Investment dollars have begun to broaden into industries beyond software as a service (SaaS) including previously overlooked sectors like defense-tech and semiconductor manufacturing startups.
Geographic focus is widening with more VCs and startups coming from new regions, such as the Middle East.
Technology, particularly AI, continues to advance at a rapid clip with other industries like biotechnology benefitting massively from the improvements in computing power.
VCs invested $185 billion to date in 2024, reflecting positive momentum, but the market has yet to fully recover.
The VC market continues to face several headwinds, most prominently the lack of exits and investor distributions. 2024 saw just 28 VC-backed IPOs raising almost $8 billion. Mergers and acquisitions (M&A) have also been particularly lacking this year for VC-backed companies.
AI and machine learning deal value reached $82 billion in 2024 to date. This figure was bolstered by more than 100 deals raising $100 million or more and 13 deals raising $1 billion or more. Many of these deals saw participation from the hyperscalers with a few select deals having debt-like structures that included components such as convertibles and credit facilities.

^{Note: IPOs with deal values of less than $25 million, best efforts offerings, oil and gas royalty trusts, business development companies, pricing on OTC Bulletin Board and OTC Pink Sheets are excluded from this narrative. Data from SEC filings and third-party databases are as of 11/29/24.}

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