The initial public offering market has woken up. 

Space Exploration Technologies Corp.’s blockbuster $75-billion IPO earlier this month was perhaps the loudest alarm, sounding off amid booming investor hunger for hyperscalers in the artificial intelligence ecosystem. 

The Texas-based giant’s record-breaking public offering sent ripples across Los Angeles’ aerospace and defense scene, home to a swath of current and former SpaceX employees now flooded in new riches.

Successful IPOs can skyrocket company valuations and stockholder net worths. They can also serve as a point of comparison for firms eyeing the public markets and send a powerful signal that investors are willing to back growth-oriented companies, said Tony Sciarrino, the downtown-based head of BMO’s U.S. Commercial Bank. 

“When momentum starts the way it feels like it’s starting this year, your investors will pay the right multiple for the right types of companies,” Sciarrino said. 

Coming off four sluggish years, a reopening IPO window is drawing in confident, late-stage companies hoping to raise big. The SpaceX public offering raked in $5 billion more than the combined proceeds from all U.S. IPOs last year, according to data from the U.S. Securities and Exchange Commission. 

“We’re seeing the most active IPO market since 2021,” said Karim Anani, Ernst & Young’s global IPO leader in based downtown L.A. “Because of the size of some of these IPOs, you might have the largest amount raised in one calendar year in U.S. domestic IPOs ever.”

A strong IPO pipeline is building for the year’s second half and into 2027, with Bay Area-based AI giants OpenAI and Anthropic filing paperwork with the SEC for their highly anticipated Wall Street debuts. 

Few L.A. companies seem poised to tap the public markets in the nearest future. Kim Kardashian’s West Hollywood-based apparel brand Skims cooled its plans to go public after raising $225 million in November to build out its brick-and-mortar business.

Billionaire Patrick Soon-Shiong announced last summer plans to eventually take his Los Angeles Times Media Group public through the unconventional regulation A public offering. He made a move closer toward his effort in October last year, unveiling a so-called “private placement offering,” which sought to raise up to $500 million.

The company, which combines the Los Angeles Times, LA Times Studios, NantStudios and NantGames, offered investors and funds preferred stock at $5,000 a share, paying a 7% annual dividend and a 25% discount for conversion to common stock.

‘Good time to sell’

The confluence of high equity valuations, ample available capital and the expectation that inflation could climb makes now the time for opportunistic companies to test the public waters, said Gerard Hoberg, a professor of finance and business economics at the University of Southern California’s Marshall School of Business. 

“Selling equity right now at these prices, given the risk profile that exists, is a pretty attractive option,” Hoberg said. “Usually, high risk makes prices low. When you have high prices and high risk, it means it’s a good time to sell.”

Lock-up agreements mean insiders can’t sell equity immediately as companies go public. But in the case of SpaceX’s pre-IPO founders and investors, many of whom own large blocks of shares in the $2.6-trillion firm, sell-offs can start once second-quarter earnings are out. 

Recovery across sectors

The IPO market’s recovery has been broad-based, Anani said, including the typically top-performing technology and healthcare industries alongside others like metals and mining, energy, and aerospace and defense. 

“It’s been a really good year, and you get a lot more participation cutting across segments and industries, which I think is healthy,” he said. “It indicates that there is a real appetite in the markets for more public companies, more variety of alternatives to invest money in different theses.”

More well-established companies tied to physical AI infrastructure and the build-out of data centers are particularly well-positioned, Sciarrino said. 

“Size and scale matters,” he said. “Some businesses that are not as earnings-sensitive, meaning they’re in AI and the expectation is of them scaling – if you’re in that arena, where you are able to forecast earnings (and) you feel like you have less execution risk, you’re going to go to public markets now.”

Before going public, companies need to be ready to be compared to their peers and have a handle on possible disruption from forces like artificial intelligence, Sciarrino said. In the run-up to an IPO, a process that could take up to a year, firms should invest in internal controls and secure the right business management system partners, he said.

“We live in a world that’s very data-driven, so if you don’t have a good (enterprise resource planning) system … you’re not going to be in a position to go public,” Sciarrino said, noting that smaller, fast-growing players often lack the data infrastructure expected of public companies. 

While the dot-com boom of the 1990s rewarded a slew of “internet companies” – big or small – with successful public debuts, the current IPO wave is more selective, Hoberg said. An explosion of bank and non-bank lending to private companies is one reason for the change, he said.

“The private markets weren’t like they are now back then,” Hoberg said. “If you made it to a relevant size, you would just go public, and that was a cheaper form of capital back then. These days, it’s different because the private capital has become cheaper and more patient.”

Private for longer

The slow years that preceded today’s IPO wave gave the private markets – where non-listed companies sell ownership stakes to private equity firms and loan capital from private credit funds – their time to shine. For most businesses, most value creation now takes place outside of public markets. 

Startups that went public last year took an average of 12 years to reach an IPO from the time of their founding, according to research from the University of Florida. Historically, companies aimed to go public within seven to nine years.

But as companies stay private for longer, operating without regulatory burdens and quarterly pressures of the public markets, the private equity firms in whose portfolios they sit have struggled to find profitable ways to unload them. An estimated 33,000 companies are stuck without a viable exit path in a historic private-equity selloff drought, according to a newly released midyear report from Bain & Company.

Jonathan Sokoloff, managing director at Westwood-based private equity firm Leonard Green & Partners, has described the exits as an industry “crisis” created in part by a sluggish IPO market that even in its recovery is highly selective. 

“The IPO market is really messed up, and it was a huge source of exits for us,” Sokoloff said in a panel discussion at the Milken Institute’s 29th annual Global Conference in Beverly Hills in May. “They say, ‘Oh, the IPO market’s back.’ … Well, you’ve got to be giant. You have to be at least $5 billion, maybe $10 billion enterprise value. You’ve got to be growing double-digit organically. You have to be unlevered.”

An IPO window re-opening for only the biggest, most scaled businesses means little to the liquidity-strapped private equity firms who deal primarily in the middle-market.

Firms like Beverly Hills-based NMS Capital Group take on companies whose growth and revenue figures often pale in comparison to firms like SpaceX and Medline Industries, the medical supply giant whose massive IPO raised $7.2 billion in December. 

Arthur Mansourian, managing partner at NMS, said the companies he works with often harbor go-public dreams – but most, if not all, don’t come true. Whether the IPO market is sleepy or highly competitive, other exit strategies become the focus, he said.

“Five years ago, a company might have assumed there would be multiple exit paths available at a good valuation,” Mansourian said. “Today, management teams and sponsors have to be more deliberate – you have to build the company so it can succeed under many different outcomes.”

The most common way the firm exits portfolio companies is through a sale to a strategic buyer or another firm, he said. PitchBook reported that the global secondaries market, where private equity firms resell assets to other investors, hit a record volume of $226 billion last year, up 41% from 2024. 

There’s an emerging sentiment that an IPO is no longer the “end-all-be-all” to a firm’s exit out of private equity hands, said Aric Johnstone, who leads WilliamsMarston’s accounting advisory practice in Southern California and the U.S. West.

“A big part of the private equity value creation story is kind of this idea of roll-ups and bolt-on investments: ‘How can we go out and find synergistic assets that we can bring into a single platform to create long term value for partners?’” Johnstone said. 

The gap between private equity firms that have found ways, despite a sluggish or challenging IPO market, to unlock value and those that haven’t has widened. But a greater dispersion of returns has not soured J.P. Morgan Private Bank on private equity investing. 

“Private equity as a strategy, as an asset class, is continuing to deliver in line with our expectations, and, most importantly, (those of) our clients,” said Rory Doyle, the bank’s newly appointed head of investments and advice for L.A. “A lot of it goes back to that phenomenon of companies staying private longer, particularly in those sectors that are most transformative and fast growing.”

Rising tides

The IPO boom likely won’t hit L.A., a largely middle-market town, quite as hard as it does the Bay Area, Johnstone said. However, while the latter has a hefty line-up of AI, quantum, fintech and biotech firms teeing up to go public, the defense tech cluster in L.A.’s South Bay could stand to benefit from growing investor interest in the sector.

“In certain industry verticals like aerospace and defense, for example, where you have companies like SpaceX or Anduril and others, it seems like there’s a very positive trend right now that a lot of people are observing,” he said, “where companies feel like it’s a good environment to go test the public markets, and they’re making urgent efforts to do so.”

The hype that high-profile aerospace IPOs build can encourage investment in the sector’s smaller firms, like Redondo Beach-based Impulse Space. Eric Romo, president and chief operations officer for the in-space mobility company, said hotly discussed go-public moves help demystify the industry to potential investors. 

“The technologies in space are quite complicated, and that’s often been a barrier for entry for investors,” Romo said. “Attention that’s paid to the space sector because of these IPOs is a really positive thing for companies like ours.”

SpaceX’s mega-IPO did more for L.A.’s defense tech industry than stir attention and excitement, said Hoberg. The liquidity event made millionaires out of more than 4,400 current and former employees, many of whom stayed in the South Bay despite the company moving its corporate headquarters out of Hawthorne.

New money means new ventures that could, in time, set sights on the public markets, he said.

“A lot of those folks will have ideas and start something new,” Hoberg said, “and that will create more demand for private capital to get venture funding behind some of those new startups, so that might stimulate more IPOs to create more capital.”

But L.A. won’t have to wait for nascent defense tech firms to blossom into IPO-ready mammoths, Sciarrino said. The spread of the IPO market’s recovery across a variety of industries could put players in the city’s insurance services, software, energy, financial technology and real estate industries on the public track soon, he said.

“We feel better about our 2027 pipeline right now than we’ve ever felt,” Sciarrino said.