The IPO market was looking strong through mid-February. But new issues have dropped off in the last two weeks, probably because news out of Washington sounds dysfunctional, investor sentiment is falling and the broad market has been on edge.
This stinks for those of us who monitor the IPO market as part of our process for seeking out the next batch of potential big winners.
New issues increase the supply of names to consider buying. And a strong IPO market is often associated with increased M&A activity and spin-outs, which provide additional opportunities for nimble investors.
In my Cabot Early Opportunities advisory, a few IPO winners from the last couple of years that come to mind are Cava (CAVA), Vertiv (VRT) and FTAI Aviation (FTAI).
Going back further, I think of CrowdStrike (CRWD), Datadog (DDOG), Dynatrace (DT), Cloudflare (NET), Chewy (CHWY), Bill.com (BILL) and Upstart (UPST). Those names all delivered double-digit returns, with several doubles and a couple triples.
It wasn’t always easy to hold these names, and I certainly didn’t play them all perfectly. But that’s another story.
My point today is that a healthy IPO market created opportunities. And after a strong start to 2025, the IPO market is drying up.
A Quick Look at the IPO Market in 2025
Year to date (YTD) there have been 32 IPOs priced. That’s a 60% increase over last year at this time.
Of those 32, 17 came public in January (vs. 11 last Jan.) and 15 so far in February (vs. a total of 10 all last Feb.).
But only two companies, Basel Medical (BMGL) and Anbio (NNNN), have come public since February 13. And they were both very small, raising less than $10 million each.
Speaking of IPO sizes, total proceeds are up by 14% to $6.6 billion YTD. Given that the number of IPOs is up 60% but proceeds are up only 14%, that tells us that deal size has been relatively small.
Venture Global (VG), at $1.75 billion raised, is the biggest IPO YTD.
Interestingly, the number of SPAC IPOs has hit a four-year high. A dozen blank-check companies have priced, significantly more than the three that priced through this point of 2024.
The performance of SPACs isn’t that inspiring, however. According to Renaissance Capital, only about 15% of companies that completed a merger through the SPAC process over the past five years trade above the $10 offer price.
The SPAC market continues to be dominated by tech, quantum, crypto, space, satellite, nuclear and alternative energy-type names. Exciting for sure, but the data shows it’s best to be pretty cautious when wading into the SPAC pool.
Two 2025 IPOs to Keep an Eye On
It’s very rare that I’ll jump into an IPO that hasn’t been trading for at least a few months. I’ll typically put the ones that seem interesting on a watch list and keep tabs on them until the lockup expiration date has passed, then consider taking a stake.
Given that, the following two companies are definitely not recommendations. They are simply two of the larger (a relative term) IPOs so far this year that have businesses that I find interesting and will be keeping an eye on.
You may want to do the same.
Karman Space & Defense (KRMN)
Karman (KRMN) is an aerospace company that engineers and manufacturers integrated payload protection, propulsion and interstage system solutions for a number of aerospace and defense prime contractors.
The business is focused on three markets: hypersonic and strategic missile defense, missile and integrated defense systems and space and launch.
A few specific components that Karman makes are heat shields, rocket bodies, launcher systems and solid rocket motors.
No program has made up more than 10% of the company’s trailing nine-month revenue, which was $254 million (+24.7%) and generated GAAP net income of $11 million.
The company currently has a market cap of $4 billion and just came public on February 13 at 22. Shares have traded as high as 32.4. As of yesterday, KRMN stock was trading close to 30, so it’s up about 36% from the IPO price.
I think this is one worth watching given the rising interest in space development.
Metsera (MTSR)
Metsera (MTSR) is a pre-revenue biotech company advancing injectable and oral treatments to treat obesity.
The company’s most advanced asset, MET-097, is an injectable GLP-1 that’s in a Phase 2b trial with a 28-week data readout coming in the middle of this year. One of the reported benefits of this drug candidate is that dosing in the initial phase is consistent, and then it’s once monthly.
The company will also have multiple Phase 1 trial readouts mid-year, including MET-233 (another GLP-1) and a combined MET-097 and MET-233 trial. The oral candidates are a little further behind the development curve.
Metsera has around $640 million in cash, which management says will last until Phase 3 trials are slated to begin in 2026.
Like most early-stage biotech stocks, MTSR is likely to offer a wild ride, rising and/or falling on trial data, then drifting around in between.
For those interested in the science, I suggest reading up on it, then being super patient with purchases and looking to buy on the inevitable drawdowns.
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