Limited IPO Activity Drives High Valuations Amid Investor Enthusiasm

Investor appetite for IPOs has returned in select cases, with recent listings from CoreWeave (CRWV.O), Circle Internet Group (CRCL.N), and Chime Financial (CHYM.O) experiencing sharp price surges. Despite these gains, the broader IPO market remains sluggish, with only $12 billion raised through first-time offerings so far this year—falling short of even the underwhelming $14 billion raised in the same period of 2024. In a climate where new listings are scarce, demand appears concentrated, contributing to steep valuations.

Chime’s IPO performance exemplifies the phenomenon. As a growing player in the fintech sector, its stock rose 37% above the offering price on its first day of trading. Interestingly, this occurred even as peer companies Circle and Voyager Technologies (VOYG.N) saw their share prices fall by 10% and 19% respectively, resulting in a combined $3.1 billion in lost market value. Chime, conversely, gained $3.6 billion on a day when the broader market was up, suggesting investors rotated capital between debutants.

Circle, which offers cryptocurrency-related services, delivered an even more dramatic debut, with shares climbing nearly 170% and generating $11.6 billion in added market value. Yet, CoreWeave—a company closely tied to artificial intelligence infrastructure—lost $10 billion in valuation on the same day. These large swings underscore a pattern of capital chasing momentum rather than fundamentals.

Several factors may be driving this behavior. Hedge funds seeking short-term gains, along with retail investors drawn to high-growth narratives, are funneling capital into a limited pool of newly public companies. With few IPO options, attention becomes disproportionately focused on companies that align with current market trends, such as fintech, AI, or crypto.

Despite elevated volatility, most of these IPO stocks continue to trade well above their offering prices. Each business is tied to popular sectors with perceived long-term potential: Circle could benefit from more favorable U.S. cryptocurrency regulations, while CoreWeave is strategically positioned to serve the AI industry’s escalating demand for computational resources. Nonetheless, the valuations appear stretched. Circle, for example, now trades at more than 190 times its prior-year earnings, a figure difficult to justify purely on performance metrics.

As more companies prepare to go public—including crypto platforms like Gemini and Bullish, as well as Cirsa Enterprises, a Spanish casino operator backed by Blackstone—the dynamic may shift. A larger IPO slate could allow investors to be more discerning, potentially tempering the extreme valuation jumps seen in today’s thinner market. In such a scenario, only the strongest candidates are likely to attract significant capital and maintain momentum post-listing.