IPOs Are Coming
A new year brings new hope and, for many global investors – big and small – the year 2025 is one filled with widespread optimism of a resurgence in IPO activity. While 2024 was filled with phrases such as “cautiously optimistic” and “reserved expectations” describing global markets, recent reporting by financial sources and commentary by industry experts have taken on a tone of more bullish confidence. For instance:
- In its report on Smithfield Foods Inc. having filed for its initial public offering on January 6, Bloomberg News said that “the potential listing adds to expectations that the US IPO market’s volume could return to its pre-pandemic average.” In recent days, Smithfield Foods has noted that it is targeting a valuation of up to US$10.73 billion in its New York flotation.
- On January 4, Financial Times noted that “Wall Street bankers are gearing up for a revival in initial public offerings.” FT went on to say that “bankers and analysts are expecting a flurry of listing announcements in the first half of 2025 … on hopes President-elect Donald Trump will cut regulations and taxes.”
- In mid-January, Spanish travel technology firm HBX Group announced plans to launch its public listing in the upcoming weeks, with a planned valuation of €5 billion. In earlier reporting on this listing – cited as one of Europe’s first major IPOs of the year – Bloomberg News said that private equity groups were gearing up to take companies public in 2025 “as pressure builds to return cash to investors, at a time when stock prices remain high.” In fact, PitchBook reports that private equity-backed companies could capture 40% of all the initial public offering capital raised on major US exchanges in 2025.
- Recently, The Economic Times (India) quoted Goldman Sachs’ head of Asia (excluding Japan) Investment Banking saying that the Indian domestic capital market may see the “IPO party” extend into 2025, with dealmaking through mergers and acquisitions (M&A) also accelerating globally.
Indeed, closely related to this anticipation of an active public-listing scene is the expectation that more financial transactions and investments are on the horizon as well. Dealmaking activities – whether via M&As or traditional investments – are expected to increase in 2025, with investors taking advantage of lowered and more stable US interest rates and the possibility of decreased corporate regulations being considered by the Trump administration. With the new US president in office for not yet two weeks, executive orders have already been signed into place that may impact US businesses and the global economy, including expanding American energy production and issuing a regulatory freeze. At the same time, the threat of tariffs remains strong, with the White House recently declaring a 25% tariff on Colombian imports if the South American country did not accept deportation flights from the US; the situation was resolved but not without much concern and wariness around the world, and President Trump has indicated that he may issue tariffs against even larger trading partners such as China and Mexico in the upcoming days. It remains to be seen what policies the new administration will prioritize and which of those may have the biggest impact – positive or otherwise – on markets near and far.
Despite some uncertainties, most industry analysts agree that prospects are high for a fruitful year. What is not uncertain is that no investment is ever guaranteed to succeed. Sponsors and investors must conduct thorough due diligence to determine that the companies of interest and their associated individuals have solid track records of success, with no exaggerated or falsified claims of achievements, thus doing all they can to ensure that each party involved in the public listing or financial transaction will be rewarded monetarily and reputationally. Integrity Risk International continues to be the go-to expert in providing this necessary insight, utilizing years of experience and knowledge in understanding and identifying risks. Our team of multilingual, experienced analysts comb through findings with an eye for necessary details and context. Already well-trained and highly skilled, our analysts today also have at their fingertips access to AI technology that helps them procure, analyze and review research even more expeditiously and precisely. This can only prove beneficial as the right opportunities wait for no one.
Early (and Potential) Public Listings
The early days of 2025 have already seen one significant public listing – as well as a highly anticipated one – that could be a precursor of robust global IPO activity for the rest of the year. As noted earlier, Smithfield Foods filed for its public listing just a few days after the world rang in the New Year. Hong Kong-based WH Group, the world’s largest pork producer that took Smithfield private in 2013 for US$4.7 billion, will sell some of its own shares in the offering, alongside the company. The IPO, which is expected to represent up to 20% of Smithfield’s shares, has recently been valued at US$10.73 billion.
Meanwhile, across the Atlantic, HBX Group of Spain announced that it is preparing to launch its IPO in just a few weeks. In early January, Reuters reported on how the global B2B travel tech company’s private-equity owners have been planning an IPO for the past year. When the listing occurs, it would be the first major European IPO this year, launched at a time when industry analysts have been more bullish on European equities. For instance, Deutsche Bank and Citigroup recently issued positive reports on European markets, with analysts citing an improving political climate and strong corporate earnings bolstering the outlook for the year.
HBX Group is not alone in having financial industry analysts and experts salivating at a potential public listing. Media outlets have been steadily and eagerly predicting which companies will go public in 2025. These include:
- Chime – This fintech company offers “helpful, easy” online banking services such as no-fee checking accounts and high-yield savings accounts, as well as debit cards and secured credit cards. It has been valued at US$25 billion by the Wall Street Journal, and expectations for its public listing have been growing since early 2022, with Bloomberg now predicting the company will make its move this year.
- Discord – What started out as an online communications tool aimed mainly at gamers has evolved into a popular social media platform for a more diverse population, including educators and business groups. Discord has been on Wall Street’s radar since it ended talks with Microsoft in 2021 over a US$10 billion takeover. The company has been valued at US$15 billion and now boasts as many as 200 million monthly active users.
- Databricks – Word on Wall Street and Main Street in recent months has been that Databricks, the global data, analytics, and artificial intelligence (AI) company, will soon be launching its IPO. A darling of investors – just last week, the company secured Meta as a US$10 billion investor – Databricks has seen its valuation increase from an already-staggering US$53 billion in 2023 to an astounding US$62 billion by the end of 2024. CNBC noted in late December that “technology investors have been anticipating a Databricks initial public offering for years. They may only have to wait a few more months.” So, will they or won’t they? That is the $64,000 (or should it be $62 billion) question.
- Canva – Rumors have swirled since 2023 that design-software maker Canva will be going public soon but the fervor has picked up steam as of late. In November, the Sydney, Australia startup hired its first finance chief, the former CFO of Zoom who helped take that company public. Canva says it generates around US$2.5 billion in annualized capital and has been profitable for at least seven years, details that should grab investors’ attention and pique their interest.
Western markets do not hold the monopoly for tantalizing, potential IPOs for 2025. Last year, India stormed past China as Asia’s top market for company listings. In fact, Financial Times predicted at the end of December that India will be the world’s second largest equity fundraising market – behind only the US – for the first time. Figures from KPMG show the National Stock Exchange of India is on track to be the top venue for primary listings by value, ahead of Nasdaq and Hong Kong Stock Exchange. Overall, bankers believe this exuberance in primary and secondary listings in India will be sustained in 2025. A Mumbai banker predicted in the FT article that “the first two quarters of 2025 will see no change” from the go-go days of 2024. Global bankers agree. They, too, remain bullish on India, with UBS’ global co-head of equity capital markets saying that “it would not surprise me if India continues to grow.”
Mergers & Acquisitions
Increased IPOs are not the only transaction activity expected to increase in 2025. The outlook for M&A in 2025 is also largely positive, with Ernst & Young estimating that M&A activity is expected to rise 10% in 2025. Several industry publications point to the stabilization and potential decrease in interest rates as well as lower inflation trends as positive signs for more M&A activity. As for sectors, many highlight the following as key sectors for M&A activity in 2025.
- Technology
- Healthcare
- Energy/Power
- Financial Services
- Consumer/Retail
While the overall M&A outlook is optimistic, potential challenges remain the same as prior years, especially geopolitical uncertainties.
Private Equity Activity
The Wall Street Journal reports that private equity firms have more than USD 500 billion in uninvested capital from funds closed in 2020 and 2021. Many speculate that this money will need to “come off of the sidelines” in 2025 as these firms face growing pressure to invest the funds. Ernst & Young’s Deal Barometer estimates that private equity deals will increase 16% in 2025. This comes as Reuters reports that private equity firms have struggled to sell or list portfolio companies in the last two years, mainly due to steep interest rates and tough market conditions. Improving economic conditions and potential interest rate cuts boosting investor confidence are expected to drive a resurgence in deal activity for private equity firms. As for new investments, several sectors are expected to see potential growth from private equity investments, with substantial investments in the technology sector, especially related to AI. Adams Street Partners reports that early-stage AI companies should continue to raise significant capital throughout 2025 which may be attractive to private equity firms looking to invest funds.
While many publications are focusing on the US private equity market due to the recent change in administration, increased investment activity is not isolated to the US. Japan, for example, is widely expected to see an increase in private equity activity in 2025. By mid-2024, PitchBook reported that Japan had already raised the same amount of private equity capital (roughly US$4.7 billion) as had been raised in all of 2023 and by the end of 2024 had become the largest private equity market in Asia. Due to Japan’s aging demographics, the healthcare sector is an attractive sector for private equity investments in 2025.
It doesn’t take a genius to know that a company with five people which has no product, no innovation, no IP [is not] worth hundreds of millions, sometimes billions.
Are You Ready???
Are these promising early days – and hopeful predictions – a harbinger for the rest of the year? Quite literally, only time will tell. Nonetheless, even with the heady optimism surrounding possible upcoming transactions, investors should remember that just because there is much chatter surrounding a potential listing or deal, does not mean there will be no pitfalls. For instance, investors have been patiently waiting for a possible listing by Shein, the low-cost, fast-fashion Asian retailer that skyrocketed to fame – and notoriety – in recent years. Sources told Reuters recently that the company plans to list on the London Stock Exchange by mid-year. However, investors should note that this possible listing comes after Shein – founded in China but now headquartered in Singapore – ended its attempt at a US IPO after concerns regarding its alleged labor malpractices, among other issues. The company stayed mum when UK government officials asked even the most basic question of whether it sources cotton from China; just days ago, it finally stated in written evidence to a parliamentary committee chair that Shein requires contract manufacturers to source cotton only from approved regions, which do not include China, for products it sells in the US, its biggest market. Such hesitancy for necessary transparency by any company should serve as a red flag – and makes an even stronger case – for investors to do their own due diligence, so that a complete and accurate picture can be obtained on that entity’s operations and activities.
This scenario is simply one example of why financial institutions considering an IPO or investment target must conduct meticulous due diligence into the company, as well as its executives and board of directors. Confidence is secured with information, and IntegrityRisk helps to provide the most thorough, accurate information possible to enable sponsors and investors make their best decisions. Our in-depth IPO / Capital Markets due diligence process provides insight that allows our clients to ensure regulatory compliance, confirms accuracy of the information provided by the target, and thoroughly vets company leadership, structure, and operations.
The excitement over a promising 2025 should not overshadow nor eliminate the need for sponsors and investors to remain cautious and do their homework when determining the best target investments. Even Databricks CEO Ali Ghodsi has offered commentary that highlights the importance of conducting the necessary due diligence: “It doesn’t take a genius to know that a company with five people which has no product, no innovation, no IP [is not] worth hundreds of millions, sometimes billions.” Taking the time and effort to properly research the subjects of interest not only ensures solid returns for a deal’s sponsors but also helps protect market conditions overall. As Ghodsi notes, “you get billion-dollar valuations on these startups that have nothing — that’s a bubble.” And a bubble that bursts can only lead to years of (yet again) global economic strife and financial pessimism. We have just exited such a time; there is no need to return to it anytime soon.
IPOs and increased financial activity are coming… and IntegrityRisk is ready. Will you be as well?