IPO blowout forecast for 2025 threatened by Trump tariffs

On By Littum

(Bloomberg) — Stock markets have cheered the return of Donald Trump, shrugging off the prospect of tariffs he has long promised to impose on America’s biggest trading partners.

Most read from Bloomberg

IPO bankers, who have spent months helping companies prepare for what is expected to be a bumper year for debuts, have a humble plea for the president-elect: Could he just stay out of the market?

Even after a year in which volume is up more than 60% from 2023, U.S. stocks are still recovering from a string of rate hikes that slammed the door on pandemic stimulus and triggered a stock market correction. While the exact timing of a return to normal is up for debate, all eyes are on 2025 as long as the incoming administration’s policies don’t throw cold water on it.

“The biggest risk is that it creates unnecessary volatility in the market as a whole,” said Clay Hale, co-head of equity capital markets at Wells Fargo & Co. “When there is volatility in the market and investors are focused on their portfolio, “are less likely to engage in adding a company from the private markets.”

Taking a company public has been compared to managing an aircraft carrier: it takes time to get a handle on documents, engage with investors and clean up the balance sheet. With volatility mostly absent for the better part of a year, dealmakers have had time to prepare for marquee listings such as CoreWeave, Medline Industries Inc. and Genesys Cloud Services Inc., which could raise single-digit billion dollars.

A flurry of big deals next year could blow past the $43 billion raised through initial public offerings this year on U.S. exchanges, data compiled by Bloomberg show.

Still, even with markets hanging near record highs amid expectations of a strong economy and more growth on the horizon, “there’s still some uncertainty,” according to Kevin Foley, JPMorgan Chase & Co.’s global head of capital markets.

“There is optimism that the new administration will bring deregulation and reduce inflation, but tariffs are inherently inflationary,” Foley said in an interview.

Private Equity Dilemma

The return of sharply rising prices would force the Federal Reserve to reconsider the interest rate path. That could exacerbate the dilemma for private equity firms with a raft of companies to go public or sell nearly $3 trillion in October, not to mention debt service costs that would likely continue to rise.

“A lot of the activity will come from the private equity community,” said Arnaud Blanchard, global co-head of equity capital markets at Morgan Stanley, whose firm is working on a pipeline of buyout firm-backed deals. “But this is not a 2020 market and it will still favor high-quality assets where the inflated amounts and implied market values ​​are not subscales.”