A flurry of startup IPOs has hit the market in early 2026, but the performance of these newly public companies is leaving investors wanting more. While the IPO market is showing signs of life after a prolonged slowdown, the initial performance of many of these stocks is raising concerns about whether the hype matches reality.
Several factors are contributing to this "debut debacle." After the post-pandemic venture capital winter that caused a contraction in the U.S. IPO activity, the number of listings and aggregate capital raised declined sharply. In 2021, U.S. exchanges hosted 1,035 IPOs, but that figure plummeted to just 181 by 2022.
Macroeconomic conditions also play a significant role. Despite expectations, a formal recession has not materialized, but the U.S. economy has faced external shocks, including tariffs and a government shutdown. The Federal Reserve began cutting rates in December 2024, but the pace accelerated only in the second half of 2025. These factors, combined with geopolitical tensions, could disrupt supply chains and delay public listings.
Market watchers point to the possibility that the strong performance of the IPOX 100 U.S. Index, which measures the performance of the 100 largest recent public companies, may be attracting investors and potential issuers with its strong returns. The index has outperformed the S\&P 500 by nearly two times, capturing approximately 85% of total market capitalization created through IPOs and corporate spin-offs.
However, the performance of recent IPOs tells a different story. In the biotech sector, for example, only five companies raising more than $50 million have gone public in 2025, following 18 IPOs in 2024, a sharp decline from the 150 companies that went public during the 2020-2021 pandemic era. Almost all biotech companies that raised more than $50 million in IPOs since early 2024 are trading below their listing prices, and the Nasdaq Biotechnology Index is down 4% this year. Experts predict the biotech IPO market will not normalize until 2026, causing companies to seek alternative funding and develop more targeted business strategies.
Several significant IPOs are on the horizon, including potential offerings from AI companies. OpenAI and SpaceX are valued at $830 billion and $800 billion, respectively, and their trading launch could significantly increase the wealth of their executives and investors. Databricks and Plaid are also considered "very likely" IPO candidates.
For now, investors are proceeding with caution as they assess whether the current IPO slump is a temporary hiccup or a sign of deeper problems in the market.
