A Comeback for IPOs and Equity Capital Markets

The market for initial public offerings (IPOs) is restarting a long-awaited repair cycle after emerging from a freeze in the spring of 2025 due to market volatility caused by new U.S. tariff policies. In the last several years, especially post-COVID-19 in 2022 and 2023, IPO activity has been more muted as higher interest rates resulted in lower company valuations and stock prices.

Equity capital market issuances including IPOs rebounded in 2024 and are starting to gain more traction again in 2025 after a pause in April due to tariff policy uncertainty. Despite geopolitical and trade tensions that made market conditions challenging, new issuances in the first half of 2025 have risen 7% year over year, with a total of 499 deals, including 168 IPOs, 292 follow-ons and 39 convertibles.¹

Morgan Stanley served as lead left or joint lead bookrunner on nine of the 15 biggest IPOs in the Americas by money raised spanning technology, industrials, financials, real estate and consumer in the last 12 months.² “Our leadership in equity sales and trading and our retail investor platform gives us unique insights into risk sentiment from investors—we were able to leverage that to give the best advice to clients,” said Arnaud Blanchard, Global Co-Head of Equity Capital Markets at Morgan Stanley. “The first half’s IPOs that reopened the market successfully have traded well and created a more constructive backdrop for the next round of IPOs.”

“When markets are volatile, it’s important to stay front footed, nimble and proactive, and—using that strategy—we have been able to help companies successfully navigate this journey,” added Eddie Molloy, Global Co-Head of Equity Capital Markets at Morgan Stanley. “From a sentiment standpoint we’re back, if not even better than where we were at the beginning of the year. It sets up for what we hope is an exciting second half and an even more active 2026.”

In the second half of 2025, companies and investors can watch for sponsor exits fueling more initial public offerings, a continued rise in private market fundraising, and demand for follow-ons and convertibles.

IPOs Comeback and Eye on Sponsor Exits

IPOs soared in 2020 and 2021, as markets capitalized on cheap borrowing and a flood of liquidity from central banks around the world, which slashed interest rates and implemented large-scale quantitative easing in response to the pandemic. Then in 2022 and 2023, equity capital markets experienced a significant cooldown, as inflation surged and central banks raised rates. Companies postponed plans to go public because of poor market valuations and volatility. Once inflation moderated and central banks began cutting rates, the IPO market showed signs of reactivation, though activity has remained below peak levels.

In the past three years, financial sponsors have delayed exits and IPOs because of higher rates and borrowing costs and lower corporate valuations. In addition to private equity and venture capital’s $2.6 trillion in uncommitted capital as of July 2024,³ there is an ever-increasing inventory of aging private-equity owned assets that need to be monetized, which may fuel a comeback for IPOs.

“Over the next several years, there are large private assets—many of which are owned by financial sponsors—that must come public in some way. We’re expecting a lot of companies to go public,” Molloy said.

The next generation of IPOs will likely come from companies that are bigger, more established and sponsor-backed, according to Molloy. As in previous years, technology and healthcare companies are expected to dominate future IPO activity, though a greater mix of sectors is likely, including industrials and financials, as well as more diverse geographic representation.

“We have a very diverse pipeline in terms of sectors, geographies and size,” said Martin Thorneycroft, Global Co-Head of Equity Capital Markets at Morgan Stanley. “Though U.S. IPOs have dominated the headlines this year, Asia has been increasingly active in the first half of 2025, and we expect activity in Europe to accelerate in the second half of 2025 and into 2026.”

While market volatility can hamper deal processes, as investors require bigger discounts to compensate for a lack of clarity on growth and profitability, Morgan Stanley will help companies find the right timing, size, structure and valuations for IPOs, Molloy said.

Continued Rise of Private Market Fundraising

Private markets have dominated fundraising for many late-stage startups, and this trend should continue, according to Molloy. In part to avoid public-market pressures, private companies have taken longer to go public, with the median age increasing from 6.9 years a decade ago to 10.7 years in 2025, according to Morningstar.⁴ In the third quarter of 2024, later-stage companies closed 43 new Series D rounds, the highest quarterly Series D count in more than two years, according to Carta.⁵

Institutional investors are also increasing their investments in non-public positions: 66% plan to raise their private asset allocations during the next five years, according to Nuveen’s recent EQuilibrium Global Institutional Investor Survey.⁶ “There’s been an evolution toward private-markets capital raising,” Molloy said. “We’ve even seen some investment firms creating new mandates and teams to invest in private companies.”

Sustained Demand for Follow-Ons and Convertibles

Companies will continue to leverage follow-on offerings (when public companies issue additional shares to raise funds) and convertible bonds (a type of corporate debt that can be converted into company stock) to fund growth while navigating the complexities of the economic landscape and market environment.

In September 2024, U.S. companies raised more than $20 billion through follow-on offerings, the highest monthly total since November 2021, according to Dealogic.⁷ Last year, the U.S. convertible bond market increased 46% from 2023 as total issuances reached $81 billion, the third-highest in more than a decade, according to Bloomberg.⁸

“In a higher-interest rate environment, companies are turning to follow-ons and convertibles as flexible, strategic tools to raise capital and avoid expensive debt,” said Molloy. “We expect these markets, especially convertibles, to be more active."