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This Free Writings & Perspectives blog from Mayer Brown discusses the IPO landscape for 2025 — highlighting insights from a panel at PLI’s 56th Annual Institute on Securities Regulation. And I’m happy to say that things are generally looking up (with some caveats).

The outlook for IPOs in 2025 appears generally positive, with several key indicators suggesting a robust environment for equity issuance.  IPO volumes have surged to nearly $30 billion this year to date, a significant increase from $18 billion last year, with 60 IPOs priced year to date, marking a 130% increase.  Broader market indices are up around 25%, indicating a healthier market overall.

Notably, the focus has shifted from the MAG-7 stocks to a broader cohort of companies benefiting from the market uptick.  As companies prepare for their public debut, there is an expectation that they will do so when they are more scaled, leading to larger IPO sizes in terms of dollars raised.

Looking ahead, the panel anticipates that IPO volumes could grow to $40 billion in 2025, with 80-85 new listings expected, driven by a more favorable macroeconomic backdrop and potential interest rate cuts.

While these improvements are promising, we have not returned to the average IPO levels of the past 15 years.  Many companies are optimizing operations in private markets, leading to increased private capital activity.  This trend allows firms to stay private longer, which could impact the number of IPOs in 2025.

At the industry level, the panel noted the following trends:

In the technology sector, there has been a notable shift in focus to the “Rule of 40,” which combines revenue growth and profit margins. Previously, the emphasis was heavily on top-line growth, often prioritizing revenue increases of 60% or more, even at the expense of profitability. Now, investors are seeking a more balanced approach, favoring companies that demonstrate sustainable growth (around 30%) alongside a reasonable profit margin (at least 10%), with many aiming for breakeven or better. This evolution reflects a broader understanding of long-term value creation.

In the artificial intelligence sector, enthusiasm remains high, with investors eager for companies that show strong potential in this transformative field.

The life sciences sector is stabilizing, with IPO activity cautious as companies enter the public market at earlier stages, particularly those with Phase 1 or 2 candidates.

Conversely, the retail sector faces challenges, with fewer profitable companies going public due to economic headwinds, including inflation and decreased consumer spending.

For more on the current state of the capital markets, financing alternatives, IPO readiness and recent developments impacting public offerings, tune in at 2 pm ET on Thursday, December 12, for our “Capital Markets: The Latest Developments” webcast featuring White & Case’s Maia Gez, Mayer Brown’s Anna Pinedo, Cooley’s Rich Segal and Gunderson Dettmer’s Andy Thorpe. Save the webcast to your calendar using links on the webcast landing page so you don’t miss it. (And, if you do, don’t panic! We always post replays — eligible for on-demand CLE credit — and transcripts after our programs.)

– Meredith Ervine