Despite tariffs reversal, bankers say the IPO market is still on ice

• The markets jumped after Trump paused his tariff plans — but the IPO window is still closed for now.
• Experts told BI the public markets won't reopen for IPOs until volatility drops significantly.
• Companies like Klarna and StubHub delayed their IPO plans after last week's tariff announcement.

After a brutal week for public markets, the major indexes jumped Wednesday when President Donald Trump said he would pause his plans for tariffs on most countries.

But industry insiders say the IPO market isn't out of the woods.

"People that are saying 'let's thread the needle' are desperate," a healthcare banker told BI on condition of anonymity. "Anybody can jump out of a window."

Tech companies and investors have been anxiously awaiting what they hoped would be a big year for public market debuts after a multiyear IPO drought. Trump's announcement last week that nearly 90 countries would face reciprocal tariffs ranging from 10% to 50% on their imports to the US shattered those hopes.

Some companies gearing up to IPO, including Klarna and StubHub, delayed their plans after the reciprocal tariffs announcement. Hinge Health was also considering a delay, Business Insider reported, although the physical therapy startup hoped to push through the market volatility to enact its IPO plans.

When Trump abruptly paused most of the tariffs on Wednesday, the public markets soared, with the S&P 500 posting its biggest single-day gain since 2008 at 9%.

But it's the market volatility that's giving bankers and analysts pause. Even if the stock market improves, as it did Wednesday, the whiplash of its rapid fall and rise in the past week isn't inspiring confidence.

Indeed, the S&P 500 tumbled by nearly 4% on Thursday as Wall Street reacted to the additional tariffs Trump still plans to levy on China.

Only a sustained period of market stabilization will be enough to reopen the IPO window for most companies, experts told BI. A temporary tick-up in stock prices just won't cut it.

Why volatility is such a deal killer

Bankers, who requested anonymity because they weren't authorized to speak with the press, said they're watching one major metric as they advise companies on their next steps toward the public markets: the volatility index.

The index, which has the ticker VIX, is designed to measure the 30-day expected volatility of the stock market. VIX values of 30 or above generally signal high volatility, while values of 20 or below signal more stability.

Market volatility doesn't necessarily correlate with lower all-time public market valuations. But high volatility makes it much harder for public investors to price a potential IPO, like trying to hit a moving target, bankers said. Plus, the volatility makes those investors less confident that the company's stock won't tank after the IPO, they said.

Matt Kennedy, a senior strategist at Renaissance Capital, said the index would need to settle below 25 for several consecutive weeks for IPO activity to meaningfully pick up. Other sources told BI they'd want the index to stay below 20.

Right now, that target looks far away. At its peak Thursday, the index leaped 52% to 54 points.

"The volatility certainly isn't encouraging companies to start the roadshow now. Whether the stock market goes up or down over the next couple of weeks, there will be very few quality companies going public," said Jay Ritter, a finance professor at the University of Florida.

Even if the market stabilizes, expect discounts

If the market ticks back up and volatility remains low for multiple consecutive weeks, some public investors may be willing to put funds toward IPOs again. But they'll expect a significant price cut, Kennedy said.

"Any sensible investor would still demand a pretty substantial discount to buy IPOs in this market," he said. "After all, if we get more turbulence, IPOs will be the first to sell off."

Bankers said that if companies are willing to accept that discount, they may still be able to go public in the second quarter of this year, provided that the market stabilizes further.

Still, Kennedy said the market slump has undoubtedly pushed many companies' IPO plans back into the later quarters of this year, at the earliest.

The slump may also further encourage companies to stay private for longer and look for payouts elsewhere, Ritter said.

"The volatility and valuation drops in public markets will be good for EquityZen, Nasdaq Private Market, Forge Global and other secondary markets, where companies that would be otherwise going public will say, we're going to let our companies sell stock on these venues, and the markets are going to have higher volume as a result," he said.