IPOs are the hot trade right now. Here's the outlook for the second half

CNBC

17-06-2025

High-profile initial public offerings in recent weeks have left investors wondering if the new issues market has woken up from a years-long slumber. Several companies that went public in the second quarter outperformed. Stablecoin issuer Circle priced its IPO above the expected range this month and went on to more than double in its first trading day. Online banking stock Chime soared in its Nasdaq debut after also pricing above the range that underwriters had marketed. Stock brokerage eToro rallied almost 29% after pricing above the expected range when making its IPO in May. The same month Hinge Health climbed 17% in its first trading day, giving the health technology company a market value above $3 billion. "We're in a really good position right now in U.S. markets," said Avery Marquez, director of investment strategies at Renaissance Capital, which provides pre-IPO research and IPO-centered ETFs. "There's a lot of momentum right now" heading into the second half. Now, the revival in the IPO market is lifting sentiment toward companies waiting on the sidelines, although opinion is mixed as to whether the recent strength can continue at the same pace. The U.S. IPO market has so far seen 150 deals in 2025 that raised nearly $27 billion in 2025, the most since 2021, according to Dealogic, a firm that tracks capital markets activity. Beating low expectations Such explains the surge in the Renaissance IPO ETF (IPO) , which invests in companies that have just gone public. The exchange traded fund has surged more than 17% this quarter, more than double the 7.5% gain in the S & P 500 in the same period. IPO .SPX 3M mountain Renaissance IPO ETF vs. S & P 500, 3-month The IPO rebound is a reversal from where investors expected the market to be at this point, said Renaissance's Marquez. The unveiling of President Donald Trump's tariff policy introduced uncertainty into the market and hampered returns, leaving traders worried that the pipeline would slow, she said. Some companies that had thought they'd go public instead delayed their IPOs as the stock market plunged in reaction to Trump's trade policies. The new issue market's performance in May and June beat low expectations, Marquez said, fueled by broader market's rally after President Trump paused his high tariff plan. With the 90-day pause expiring in early July, investors may be in a better position to absorb such shocks in the future, knowing that some U.S. trading partners have struck deals, or the outline of deals, to avoid the full impact of proposed duties, Marquez said A 'clogging situation' To be sure, the IPO market is still constrained by tighter financial conditions as a result of the Federal Reserve's tightening cycle since 2022, according to Peter Boockvar, chief investment officer at Bleakley Financial Group. Many companies are reluctant to go public now because they assume they'll get a lower valuation than would have been the case when interest rates were lower. Higher rates have also made investors more focused on current profits or the path to profitability, adopting a "show-me-the-money" mentality when it comes to evaluating companies that could IPO. "There's a clogging situation where not that many [potential candidates] are going public," Boockvar said. "There are tens of thousands of businesses that are on private equity and venture capital balance sheets that ... don't necessarily have an exit strategy that they hoped for," the CIO said. "It clogs up the entire financing network if you don't have a vibrant and robust and active IPO market." Even after four years, the U.S. IPO market is still recovering from the bull market of 2021, when interest rates were near zero. That year, more than 1,000 U.S. companies went public, raising a combined $315 billion. The year before, almost 500 companies raised $168 billion. Indeed, while Renaissance's ETF has recently outperformed, the fund is still more than 30% off its all-time high from 2021. That also helps explain why the U.S. appears to be losing its grip on the IPO market. Dealogic data shows U.S. IPOs accounted for 48% of global capital raised by new issues so far in 2025, down from 58% in the same period of 2021. Individual stocks tied to the recent IPO resurgence have also faced questions. Bank of America this week downgraded CoreWeave , which went public in March, to neutral from buy. The majority of analysts have hold-equivalent ratings on the stock and expect the share price to pull back, based on the consensus 12-month price target, per LSEG. Bank of America cited the huge runup since the seller of artificial intelligence technology in the cloud priced its IPO. At the time, CoreWeave's $1.5 billion IPO marked the largest technology offering to date on Wall Street since 2021. Public vs. private pipeline Renaissance's Marquez said there is a slim pipeline of companies that have publicly filed to go public, and are waiting for their holding period to expire. But she said there's a "ton" of movement in the private pipeline, comprised of companies that have said in news stories they have filed confidentially or are working with banks on an IPO plan. Because of the strength in the private pipeline, Marquez said investors can expect a more normalized fall calendar for IPOs. "Sometimes, investors get stuck looking at what's right in front of them ... looking at that public pipeline," Marquez said. "But investors need to kind of take a step back and ... look at these names that are still in the news, still making headlines as making progress towards an IPO, but not necessarily right in that public pipeline."