A Larger, Broader IPO Market Takes Shape

After several years marked by market volatility, higher interest rates and uneven issuance activity, the IPO market’s rebound is strengthening in 2026. The market today is defined by a maturing pipeline of issuers, wide breadth across sectors and deeper investor participation.

Equity capital markets opened the year on solid footing, with global issuance rising 43% year over year to $256.8 billion in the first quarter, while IPO volumes increased 40% to $45 billion.¹ The current environment reflects a growing pipeline of larger, later‑stage companies and broader investor participation across sectors, signaling a market that is rebuilding depth as well as breadth.

“We’re seeing IPO activity build across many sectors, driven by investor focus on long-term secular themes, with momentum also supported by financial sponsor exits and increasing engagement from retail investors,” says Eddie Molloy, Global Co-Head of Equity Capital Markets at Morgan Stanley.

Key Secular Themes Driving IPO Demand

Two dominant long-term trends are shaping IPO activity: first, the large-scale buildout of AI and digital infrastructure ecosystems, and second, rising investment across aerospace, defense and space-related technologies.

The buildout of AI infrastructure is driving demand across a broad swath of companies. “It’s not just data centers coming to market,” Molloy explains. “It’s the entire ecosystem—service providers, power infrastructure, industrial components—everything required to support that growth. Investors are highly engaged across that value chain.”

Investors are applying a similarly broad lens to aerospace and defense, where activity is expanding beyond traditional contractors into space-related infrastructure and adjacent technologies. Rising geopolitical tensions and increased government spending are driving interest across commercial and government-led programs, as well as companies supporting the broader ecosystem. Investor demand reflects a long-term focus on multi-year investment cycles tied to defense and space-related spending, according to Arnaud Blanchard, Global Co-Head of Equity Capital Markets at Morgan Stanley.

Despite the focus on these dominant themes, today’s IPO market extends well beyond them. Recent issuance has spanned sectors including real estate, healthcare, metals and mining, and consumer retail—demonstrating a healthy reopening of the market to a wider range of companies. “The IPO market is much broader than just one or two themes,” Blanchard says. “There is strong demand from a diverse investor base: Growth investors, value investors, income-focused investors and sector specialists—all contributing to demand.”

Larger, Later-Stage Companies Coming to Market

As companies have had abundant access to private capital in recent years, many are now entering the public markets at a more advanced stage of development than they would have a decade ago. “The average company going public today is much bigger than in the past,” Blanchard explains. “They tend to have more diversified cap tables, with a mix of private, crossover and traditional institutional investors.”

That maturity reflects the evolution of private markets as well. With venture, growth and private equity capital widely available over the past decade, many companies have been able to stay private longer, raising sizable rounds while building scale and operating discipline before accessing the public markets. As a result, today’s IPO pipeline includes a growing share of VC‑ and PE‑backed issuers that are further along in their lifecycle than in prior cycles.

Sponsors: Central to IPO Supply

Sponsor‑led exits continue to represent a meaningful driver of IPO supply, particularly as equity markets increasingly favor larger, more established transactions. In recent years, sponsor‑backed IPOs have represented roughly a third of U.S. listings.²

PE‑backed U.S. IPO issuance reached $12.8 billion in the third quarter of 2025 alone, the strongest period since 2022.³ Sponsor‑backed IPOs often follow extended periods of private ownership that have allowed companies to build operating scale and strengthen governance ahead of a public listing.

“Many sponsors today are managing mature, scaled portfolios, and the IPO market is an increasingly important path to realizing value,” says Bill Sanders, Global Co-Head of the Financial Sponsors Group at Morgan Stanley. “What’s different now is that public markets are rewarding quality and scale, which aligns well with the larger portfolio companies that have demonstrated durable growth.”

That shift is unfolding as private equity firms work through mature portfolios accumulated during years of high private‑market activity. With holding periods extended and exit timelines compressed, many large sponsors are now managing multiple potential IPO candidates simultaneously. As a result, public markets have become a central component of sponsors’ exit playbooks, particularly for scaled assets with durable growth profiles and clear public‑market narratives.

Retail Investors’ Larger Role

Retail investors—already a significant force in daily equity market liquidity—are becoming increasingly important participants in IPOs. Growing participation stems from earlier access, broader availability and long‑term ownership opportunities. For issuers, retail demand can be a strategic component of deal construction and aftermarket performance.

“Retail investors represent a deep and durable pool of capital,” Blanchard notes. “Their investment horizon is often longer than people expect.”

That shift is influencing how companies think about going public. Founders and management teams are paying closer attention to retail participation earlier in the IPO planning process, including how offerings are structured and distributed. Retail participation and Directed Share Programs, used to allocate shares to employees and other key individuals, are considerations in IPO readiness, according to insights from Morgan Stanley’s Founder Survey, reflecting growing awareness of the role individual investors can play in long‑term ownership and liquidity dynamics.

That engagement increasingly begins before companies go public. In parallel with traditional fundraising, a growing cohort of accredited individual investors is gaining exposure to late‑stage private companies ahead of IPOs through secondary and private‑market platforms—shaping ownership well before public listings and often carrying into life as a public company. Since 2013, individual accredited investors have completed more than 52,000 investments in nearly 500 late-stage private companies through Morgan Stanley’s pre-IPO marketplace EquityZen.

Capital Raising Beyond IPOs

The reopening of the IPO market is occurring alongside continued strength in other forms of equity capital raising, underscoring increasingly flexible funding strategies for both newly public and seasoned issuers.

In 2025, global equity capital markets issuance totaled approximately $957 billion, with follow‑on offerings raising about $200 billion and convertible issuance reaching roughly $166 billion—together accounting for more than one‑third of total equity capital raised even as IPO activity recovered.⁴

Convertible issuance has been especially active among companies tied to AI, digital infrastructure and capital‑intensive growth themes, where issuers are balancing funding needs with dilution sensitivity. At the same time, follow‑ons are increasingly being used to finance strategic activity, including acquisitions, as M&A momentum builds. Together, these instruments are expected to continue playing a central role in equity capital markets as the recovery in IPOs continues.