Public markets regain shine: Key forces driving a potential IPO reawakening

The U.S. initial public offering market stands at a critical inflection point where regulatory changes, intensifying private credit scrutiny and private equity exit pressures are all converging. Together, these forces have the potential to change the payoff matrix for issuers: Recent policy eases the cost of going public, oversight raises the cost of private markets, and sponsors need exits. This should result in sustainable, long-term appeal of the IPO market, even if short-term volatility introduces setbacks along the way.

The number of publicly traded companies in the United States has seen a severe decline over the past two decades following the 1996 high watermark of more than 8,000 U.S. public companies listed. As of Q2 2025, the total number of U.S. public companies stood at 3,934, marking a total decline of 51.4% since the peak. This trend is not unique to the U.S.; the first six months of 2025 marked London’s slowest first half for IPO volumes since 1997. Europe reflected a similar trend, recording its weakest first half for IPO volumes in over a decade.

Private credit growth draws attention

Private credit has moved from niche to mainstream in the past 15 years or so, becoming one of the fastest-expanding corners of nonbank finance. Private credit generally refers to direct lending to companies by nonbank vehicles, most notably private debt funds and business development companies. The space is roughly five times larger than it was in 2009, approaching $2 trillion globally by Q2 2024, according to the Federal Reserve.

What’s changed isn’t just the size of the private credit space but how the entire lending process works. Private credit now weaves through banks, insurers and traditional asset managers—via warehouse lines, fund finance, co-lending and risk transfers—reshaping how credit is created and where the risks ultimately sit. On paper, immediate run risk looks contained: Leverage is generally moderate, and investor capital is locked up for years. The bigger challenge is opacity. With limited public reporting and incomplete maps of who’s exposed to what, it’s difficult to judge how stress in one corner might echo through the rest of the system.

The U.S. Federal Reserve flagged growing bank credit commitments to nonbank financial institutions among the vulnerabilities in its financial stability report released in April 2025. Under its fiscal year 2025 priorities, the U.S. Securities and Exchange Commission’s (SEC) division of examinations emphasized private-fund valuations, fee/expense practices and liquidity, with targeted sweeps in illiquid and levered strategies.

The combination of rapid growth, light direct regulation and unclear interconnections is drawing sharper attention to private credit from policymakers and investors. And it creates a paradox for companies: As the private markets become more scrutinized and potentially costlier, the public markets can appear relatively attractive because of their liquidity and transparency.

Regulatory changes

Some factors that inhibit organizations from going public include complex and burdensome reporting requirements, massive financial commitments and the time lag to bring an IPO to close. Recently issued regulations and proposed plans from various organizations linked to the public markets could make organizations’ entry into the public markets significantly easier. These recalibrations aim to strengthen the IPO ecosystem by making entry into the public market cheaper, faster, more flexible and accessible to a diverse set of issuers and investors.

The New York Stock Exchange fee relief program offers a fee exemption period in which, starting April 1, 2025, issuers listing a primary class of equity securities on the NYSE will pay only the initial and annual listing fees for the first five years. During this five-year period, companies will be exempt from all other listing fees, including fees for actions such as listing additional shares of their primary class of equity securities; listing additional classes of common stock, preferred stock, warrants or rights; listing of convertible securities that can be exchanged or exercised for additional shares of the issuer’s primary share class; applications for technical original listings or reverse stock splits; or applications related to modifications or poison pills.

Separately, SEC Chairman Paul Atkins has been vocal about his goals to facilitate capital formation and expand investment opportunities by removing regulations that stifle innovation. Earlier this year, Atkins withdrew 14 rules that had not been finalized by the SEC under his predecessor’s leadership. Additionally, the agency stopped defending the climate disclosure rule, making the future of this rule uncertain and removing an immense near-term compliance obligation for companies pursuing an IPO in the short term. 

The SEC has also expanded the availability of its confidential submission process by making the review available to more issuers conducting more types of offerings. Additionally, the agency has removed the requirement to include certain historical financial information and underwriter disclosures from these initial submissions. By allowing more confidential submissions, a larger pool of companies have the ability to delay publicly signaling their intent to pursue an offering, potentially avoiding premature market speculation. The expansion to the review process offers issuers greater flexibility to explore the option of listing on the public markets. A spokesperson for the SEC recently stated: “As the chairman has said, we are getting back to our roots of promoting, rather than stifling, innovation.”

PE exit pressures

Exit value is still outpacing exit count, a sign that only a handful of top-shelf assets are clearing while a long line of PE portfolios remain on the sidelines. For the backlog to unwind, the recovery in exits must broaden beyond marquee names and reach midsize assets. Until that happens, inventories will age, distributions to paid-in capital will stall and the PE cycle will slow.

The data underlines this point: Q2 2025 delivered an estimated 314 exits, the lowest amount in a year. When analyzed from a quarterly perspective, exit value was down 46.4% and exit count was down 24.9%, according to PitchBook.

Notably, a mega listing valued at $58.7 billion enhanced Q1 2025’s overall deal value. If we strip that out of the data, quarter-over-quarter exit value fell 27.1%. In other words, momentum is inconsistent.

Where might the logjam break? The health care and technology industries have visible pipelines and real artificial intelligence adoption trajectories; the infrastructure and energy sectors enjoy policy tailwinds and long-dated transition spend. Companies demonstrating clear paths to profitability, strong scale and growth trajectories, and efficient capital deployment are positioned to benefit most from this favorable environment. Sponsors’ need to harvest combined with supportive public-market multiples in favored sectors creates a structural, multiyear opportunity for IPOs and follow-ons. This helps sponsors address a time-sensitive mandate: Convert embedded value into cash distributions to investors.

Headwinds and considerations

We anticipate volatility and uncertainty will remain persistent themes across the global economy. Various factors could have a negative impact on the reopening of the public markets, including:

• Trade policy and geopolitical uncertainty. Companies across every industry are grappling with these factors, which impact valuations and the ability to develop reliable long-term forecasts.
• Costs to list and operate a public company. These costs remain impractical for many. The underwriting fee alone can be anywhere from 4% to 7% of gross IPO proceeds. This generally constitutes the largest piece of the listing cost, alongside many other costs such as legal, accounting, SEC registration, FINRA and exchange listing fees.
• Policy reversals. The probability is low given the overarching sentiment from the current administration, but there could be some policy reversals that do not necessarily ease the path to the public markets.
• Aftermarket stumbles. Headlines about weak aftermarket performance tend to sour sentiment and disincentivize potential issuers from listing in the same window. Companies may prefer to postpone their IPO until there is a wave of issuers with strong post-IPO trading.
   

Companies weighing an IPO face many important considerations. Here are some key areas to address far in advance of filing:

• SEC and financial reporting: Convert private company financial statements to public company standards, conduct audits and prepare regulatory filings.
• Strategic finance: Streamline financial planning and analysis functions, enhance forecasting accuracy, ensure regulatory compliance by developing key performance indicators, establish efficient budgeting cycles and improve financial reporting.
• Tax: Optimize tax structure by running various modeling scenarios, reexamine the state filing footprint, screen exposure to OECD (Organisation for Economic Co-operation and Development) Pillar Two, and ensure compliance overall with complex and ever-changing tax regulations.
• Systems and controls: Assess system readiness, conduct risk assessments and test the effectiveness of controls.
• Human capital: Prepare human resources functions by developing compensation plans, implementing HR systems and ensuring compliance with SEC regulations.
• Technology: Align IT strategy with business goals, enhance cybersecurity and improve operational efficiency.

The potential rejuvenation of the U.S. public market is best understood as arising not from a single catalyst but from a structural repricing driven by policies, investor preferences and company needs. The challenges of obtaining public status are on a path to easing, the cost and complexity of some private channels could be rising, and the need for liquidity is mounting. That mix supports a longer‑lived IPO recovery.