IPO Market Sees Renewed Momentum Amidst 'Hyper Conservative' Valuations
The Initial Public Offering (IPO) market is experiencing a significant resurgence in 2025, characterized by robust investor enthusiasm. Despite this renewed interest, companies and their underwriters are adopting a 'hyper conservative' approach to IPO pricing, leading to substantial first-day gains for new listings. This strategy aims to foster market confidence and ensure successful debuts, drawing lessons from previous market cycles.
U.S. equities saw a noteworthy trend in the Initial Public Offering (IPO) market through the first half of 2025, as investor enthusiasm reignited. This resurgence, however, has been accompanied by a distinct shift towards "hyper conservatism" in pricing new issuances, a strategy that has propelled several recent listings to significant first-day gains.
The Resurgent IPO Landscape and Cautious Valuations
Recent weeks have witnessed a flurry of prominent companies entering the public market. Figure Technology Solutions (FIGR), a blockchain platform for financial services, debuted last week, pricing its IPO at approximately $25 per share and raising $787.5 million. Shares closed at $31.11 on opening day, marking a 24% increase above the IPO price, and have since traded around $37 per share. Similarly, Chime Financial (CHYM) saw its shares go public at $27, opening at over $43, and closing more than 37% higher at $37.11 on its debut, achieving a market capitalization of $12.3 billion.
Other notable IPOs reflecting this trend include Figma (FIG) and Bullish, which recorded first-day jumps of approximately 250% and 84%, respectively. CoreWeave (CRWV) also saw its stock soar 140% after its debut, and Circle Internet Group (CRCL), after pricing at $31, opened at $83 and surged to $260 within weeks before a subsequent pullback. Meanwhile, Klarna (KLAR), the Swedish 'buy now, pay later' giant, is planning an IPO targeting a $14.0 billion valuation, a significant adjustment from its peak of $46 billion in 2021, and its market cap/revenue multiple of 5 times is notably lower than the average for public fintech companies at 8.8 times.
Driving Factors Behind Conservative Pricing
The phenomenon of "hyper conservatism" in IPO pricing, as observed by Rainmaker Securities managing director Greg Martin, suggests a deliberate strategy by companies and their underwriters to set initial public offering prices below what the market might ultimately bear. This financial mechanic aims to ensure a successful market debut, generating positive momentum and investor confidence from the outset. By entering the public market with a perceived discount, new listings often experience substantial first-day price appreciation, contrasting sharply with more aggressive pricing strategies that risk a "broken IPO" or a stock trading below its offering price. This approach reflects lessons learned from previous market cycles where overvalued IPOs frequently led to investor disappointment and underperformance.
Broader Market Context and Investor Selectivity
The renewed optimism in the IPO market marks a significant recovery, with the number of U.S. IPOs in 2025 already matching the total for all of 2024. As of May 31, traditional IPOs have collectively raised over $11.0 billion. This year's IPOs have notably outperformed the broader market, averaging approximately an 11% gain year-to-date against a 1% gain in the S&P 500. However, investor selectivity remains high, with a strong focus on robust financial performance and value creation potential. The median valuation for 2025's IPO cohort has been approximately 25% higher than their highest private market figures, a stark contrast to the 100%-plus premiums seen in 2020 and 2021. Companies successfully navigating this environment are typically older, averaging 16 years compared to 12 years in 2015, and demonstrate proven profitability with clear paths to sustainable earnings.
While the average "first-day pop" for IPOs from 1980 to 2023 stands at approximately 19%, the average 3-year return is also around 19%, often underperforming the broader market. This underscores the need for investors to look beyond initial gains and focus on fundamental business strength. Potential risks, such as evolving regulatory scrutiny for blockchain-based lending (as seen with Figure Technology Solutions) and broader macroeconomic headwinds like higher interest rates, continue to factor into long-term performance.
Looking Ahead: A Robust Pipeline and Continued Discipline
The pipeline for upcoming public offerings remains robust, with several high-profile companies anticipated to debut. StubHub is targeting a late September 2025 listing, while cloud security leader Netskope plans its fall 2025 debut. Israeli fintech Lendbuzz is filing for a $1.5 billion valuation. Mega-IPOs from companies such as Databricks, Canva, and potential listings from OpenAI and Anthropic could collectively generate substantial proceeds, potentially exceeding $200 billion if the full pipeline executes. This indicates that 2025-2026 could be one of the most significant periods for tech public offerings since the dot-com era.
For late-stage startups eyeing the public markets, preparation is critical. The emphasis will remain on strong unit economics, clear profitability timelines, conservative valuation expectations based on revenue multiples rather than speculative growth, professional governance structures, and diversified business models to mitigate risks. Venture Capital firms are also keenly anticipating a long-awaited liquidity moment, with strategic timing being crucial to bring quality companies to public markets while the window remains favorable. The market will continue to monitor economic reports, Federal Reserve policy decisions, and geopolitical developments as key indicators for sustained IPO activity.
