Newscasts - Fleeting US IPO party

Chime Financial

26/06/2025 13:24

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Description: CoreWeave, Circle Internet Group and Chime Financial all enjoyed dizzying success after their stock market debuts. In this Viewsroom debate, Breakingviews columnists explain why investors are scrambling to buy these new equities and how scarcity may be adding to their allure.

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Video Transcript:

The views expressed on this podcast are those of the participants, not of Reuters News.

I was kind of talking about each of the things, each of the demand buckets for IPOs, but you really kind of put them together, right? And so, the reason we might be having these big pops is because you have the enthusiasm or you have the hype cycle that draws in some people. Then you have the kind of stable demand for IPOs that's kind of, maybe that event driven. And then once it starts moving, you now have the meme stock investors that watch the momentum much closer than they used to, and are familiar with stocks that trade, are about trading crypto.

Even as Iran and Israel fire missiles at each other and traders worry about disruptions to oil supplies, a number of companies have been braving the public markets with IPOs. Strangely, many beginning with the letter C, CoreWeave, Circle Internet Group, and Chime Financial have enjoyed dramatic success despite the rumblings of World War III.

Yes, this all seems kind of oddly hopeful, despite everything that's going on. I mean, look, we've been talking about an IPO drought for a very long time recently, but maybe, finally, we're getting to a stage where companies can somehow see through the worrying geopolitics, everything else kind of looming over markets, and actually convince people to back their vision of the long-term future, right?

I'm Aimee Donnellan.

And I'm Jonathan Guilford, and this is the Viewsroom, a weekly podcast sifting through the knottiest corporate finance questions, where we debate the implications with a crack team of Breakingviews columnists. This week, it's all about initial public offerings. So, Aimee, I feel like we've touched on the IPO market a number of times in recent months, partly because, this is something that looms over folks who are looking for that, like, final big payday, right, like quite heavily. And I think, the theme every single time has been there really isn't much activity, which is problematic for lots of folks, whether that's private equity companies that want lucrative exit, whether it's companies that need more long term funding and want a broader pool of investors, or even just from the other side of it, global investors that want to bet on the next big company, right? They're getting fewer and fewer opportunities to do that. But all that being said, we are seeing some green shoots, right?

We are. And I think, I mean, I have to, like, you put yourself in the shoes of a CEO today that's thinking about doing an IPO. I mean you've got, as we said at the very beginning, you've got rockets being fired at each other. Before this, you had tariffs kind of impacting the FTSE in the UK and the STOXX in Europe and the S&P in America. So, this, like the stock market's whipsawing all over the place as you try to kind of convince investors, you know, here's a stock you should really be buying into. This is a really long-term story here. So, yes, I think we could definitely see it as like a positive. I think a positive is probably, or like, exactly, something like that's just the very beginning. And our colleague, Stephen Gandel, referred to maybe a bit of a phenomenon we're starting to see as this shiny object syndrome. So, the idea that these companies, the few that have braved the situation, are actually massively benefiting from the fact that there is very little out there and investors do seem to want to buy stuff. So luckily, we have Stephen with us. Stephen is a columnist in New York who has been covering this trend and wrote a very interesting piece recently. So, Stephen, you are very welcome.

Thank you for having me.

So, Stephen, let's give our listeners a bit of background here for those who may not be watching the market as closely as you and I are. What's the trend been like for IPOs in recent years? And what if all of the volatility that we've seen recently, like how has that maybe affected the psyche of the CEOs looking to list for the first time?

Well, the trend, if you can imagine the chart, the trend started, it was in late 2018 and 2019 going up and then everyone thought it was going to plummet in 2020 and 2021. And instead, we had a big shoot of offerings in 2021 and 2022. Then we've had the drought and that's been kind of down here and flat for much longer than people expected because of uncertainty about the post-COVID economy, because of the election, because of Trump policy. It's been really-

And I mean, it's been those things piling on top of each other, right? Because I presume it starts with, you know, interest rates go up and, et cetera.

Right, interest rates as well. Yes, so they pile on top of each other, pushing the IPO market down and down. And so, it's been a real drought. And we thought we were going to see a few IPOs come through in March, April time. And then we had the tariff policy come out, and the market tanked. And we had a lot of uncertainty. It had come back. But it's even taken longer for the IPO market to come back. But recently, just recently, we had a few deals that have come through and they've done really well. And so that's what's got people thinking, since these few deals have done well, maybe the floodgates are open, maybe finally we're going to have a lot of IPOs.

Right. And this is the triple C trio, right? This is CoreWeave, this is Circle, this is Chime Financial-

Right.

-that are kind of leading this, which I guess sort of oddball names, right, like, Aimee, I know like when you think about kind of like your blue chip folks coming down the pipe, you don't necessarily think about, bubbly AI stock, crypto, like punchy, odd regulatory arbitrage like fintech.

Right. Well, I think they're benefiting from this wave of deregulation from Trump and the hype around AI. And so, we're in the early stages of this comeback. And so, you'd expect some of the companies that have what they call story stocks, the companies that have a story about them, that we're all going to be using stablecoins very soon, the dollar is going to be defunct or passe. Those kind of story stocks. That we're all going to be able to live off of buy now, pay later loans. That stuff kind of gets the market excited before financials.

And, Stephen, one thing that I thought I really liked about a piece that you wrote was this, as I said at the beginning, the shiny object syndrome, right? So, I mean, our banker contacts would have a different word for a scarcity premium or whatever, but what do you think the forces are at play here? Like what do think is going on with these companies in terms of why there is such a pop afterwards, why the pricing just seems to be, I guess in some ways kind of wrong, right? Because I mean, Circle is the one I'm thinking of, like the first day of trading, the shares go up 170%. Like that looks like a very strange reaction to a stock in the environment that we're in.

And I did talk to an executive there the day after, and he was excited about the pop. So that's always the disconnect. And the stock was IPO'd, it didn't open, but the IPO price was $30, and we're near $300, at least yesterday we were. So, it's crazy. But it's hard. There's two versions of what's going on. One better than the other for the next companies looking to go public. One version is that people are optimistic about the world. And they're optimistic about startups, and they're optimistic about how much money's out there for future startups, and they are optimistic about what consumers are going to spend. And so that is open the door for more and more companies to go public. And there's genuine interest in these newer startups and people, the risk is on, there's going to be risk on. The other answer or other thing that could be going on is that since there's been so few IPOs, there's a certain allocated amount of capital, hedge funds, and other investors that play on these, that's a part of their trading strategies called event-driven investing. And so, the concern is that the limited number of IPOs that we've had, that sucked up, there's more than that money chasing those limited number IPOs. And so, as we get more and more IPOs, we're not going to see performance. It's not that investors want to take risk. It's not that investors are excited about stablecoins or fintechs. It's just that they're excited about anything at this moment. And the evidence for that has been that while we've seen these very big first day pops, we haven't seen a lot of follow through. If you look at the Renaissance IPO index, that tracks how these stocks do five days after of their IPO. So, you take out the pops and how they do as public companies, and that index is down 2.3% this year compared to the S&P 500, which is up about the same, opposite, but same amount, about 2.5% and then those pops, which, you know, some of them have been a 100%. The other thing that banks, some bankers who say, you know, wait a second, maybe the IPO market isn't open, what they say is they look at how the other recent IPOs have been doing on the days of a new IPO. So, on the day when Circle went public, two other, the Chime, sorry, on the day that Chime went public, I apologize, I got the order wrong, on the day that Chime went public, Circle lost a little money. And so it could be that some investors who put their money into the most recent shiny object are just moving their money to the next shiny thing. And all they want is IPOs, they don't necessarily want these companies. And as there's more and more IPOs and they're not discriminating between them, there'll be less money to go around to all them.

Yes, the other thing I was sort of curious about just what you were, the first point that you were making is that if you, again, if you're sort of a CEO talking to investors in this time, trying to say that there is a long term story for this company, are there industries or sectors, as in the companies that you just mentioned, they are in a very specific type of business that they're doing, but, in order to get this kind deluge of more normal companies, we might say, people need to really kind of believe that things will calm down, that things will settle. I was just sort of curious, how difficult is it now to kind of convince investors if you are not one of these AI, exciting, story-driven companies? You're just like a normal run-of-the-mill, maybe like a retailer or something a bit more bog standard.

Yes, I think we've got to see one of those kind of companies go public. I mean, after Circle did really well and Chime did really well, we saw other companies say they were going to go public, but those are, or looking to go public, and one of them was Gemini, which also does crypto. Another one was Bullish, which also does crypto, so the first kind of wave of companies that said, oh, we're looking to, we are trying to capture that same trend. But since then, we've had a Florida insurer, we've had a Spanish gambling company. And the bankers I talk to say that pretty much every private equity firm is looking through their portfolio right now and seeing who can go public. I mean, there's two things going on when companies are deciding what to go public, there is an executive who's saying okay, what are the prospects for my company? How am I going to look to public investors? Then there's also some companies that are owned by investors. They've held, particularly private equity investors, they've held these companies for longer than normal because the IPO market's been closed, because there hasn't been much M&A. And so, they're motivated sellers that might not be just looking at how is this business going to play, but is this relative to what I've seen recently, is this a good time to try the IPO market? So, I think you have those two things going on. And we'll see once we get more, as you said, more, it's like a gambling company, which is some hospitality, but kind of enhanced hospitality, I guess, than some just a normal hotel. And so, when we see how those do, then maybe we'll get a better sense whether people are really betting on this, an economic kind of, the economy sailing through the problems we're having now, or it's just people like crypto.

Yes that's what I'm so curious about right because like I feel like embedded in what you're saying is that like the primary question here is, are people just chasing like weird punchy stories, in which case you should go out with like, the most like overheated kind of like AI pitch that you possibly can, and all this other stuff maybe won't do so well because like if you're thinking right, like oh it's pure scarcity value, maybe there's like this static bucket of money that always has to chase a new IPO. I mean, we haven't had IPOs since 2021. You know, kind of at least at the level that we were having it over the previous decade, decade and a half, I mean, multiple decades. And you know, we didn't really see great pops for a lot of those things. I mean you look at data collected by Jay Ritter, who's kind of like the grandfather of like IPO data, what works for, he's a professor at University of Florida and kind of puts out these, these statistics, and like 2023, I think was the first year since the financial crisis where the median first day return for an IPO was negative. So, like, we've had tight supply for a while and it seems like it's recently the stuff that's actually leading to like, these kind of like big first-day pops. So, like, what do you think it is there? Like, cause it, like I put those together with what you're saying and it feels like what that indicates is like, maybe this isn't something that is necessary like a gimme to become a broad-based thing for all these other companies that could be coming down the pipe, right, because they're not AI, because they are not, like the one part of crypto that is getting legitimized by the federal government or whatever.

Yes, I mean, I was kind of talking about each of the things, each of the demand buckets for IPOs, but you've really got to put them together, right? And so, the reason we might be having these big pops is because you have the enthusiasm or you have the hype cycle that draws in some people. Then you have that kind of stable demand for IPOs that's kind of, maybe that's event driven. And then once it starts moving, you now have the meme stock investors that watch the momentum much closer than they used to and are familiar with stocks that trade are about trading crypto. And so, you have to put those together and think, well, okay, so maybe an insurance company in Florida, they may only get that first part. And maybe as the IPOs increase, meaning the part of people that always invest in IPO, the supply of IPO investors, once that gets spread out, maybe something that has hype can sit on top of that. But you might need two or three of these things to make an IPO pop whereas like each IPO right now seems to be capturing each all three of them.

Well, any banker worth his salt will tell you that what you always need is a track record, right? You need these IPOs to do well, to encourage the others. So hopefully, as Stephen said, we're going to have to wait and see whether this actually does encourage those companies out. But I hope that we're all sitting around here talking about all the normal non-crypto companies that are IPO'ing. So, Stephen, thank you so much for your time.

Thank you.

Thanks for tuning in, this podcast was produced by Sheryl Peña in New York and Gregory Garner in Toronto. You can listen to a new episode of the Viewsroom every Thursday on the Reuters app or your favorite platform, and don't forget to tune in to our sister podcast, The Big View, every Tuesday, as well as the other great podcasts from the Reuters team. If you like what you heard, please follow the Viewsroom and let us know what you thought. And check out our views on the biggest stories in business and finance every day at Breakingviews.com and Reuters.com.