Shutdown-Induced Bottleneck Could Drive IPO Resurgence

The U.S. IPO market was gaining traction in 2025, with investor demand rising and over 1,200 privately held billion-dollar startups ready to go public. But that momentum has stalled. The government shutdown and SEC staff furloughs have created a regulatory bottleneck, halting reviews and delaying approvals. 

Despite the pause, U.S. IPO activity surged over 80% year-over-year in the first half of 2025, reaching $26 billion—the strongest pace since 2021.¹ Once the SEC resumes full operations, we expect a swift rebound as issuers move quickly to avoid stale financials and banks race to price deals before year-end. 

For investors in equity funds—especially in small caps—this backlog presents an opportunity. Many of these new listings may enter the market at attractive valuations, offering potential upside for portfolios positioned to capture early-stage growth. 

The SEC has issued interim guidance, but full restoration is needed. 

The demand is there. The deals are ready. The market is waiting for Washington to turn the lights back on.

A note about risk: The principal risks are generally those attributable to investing in stocks and related derivative instruments. Holdings are subject to market, issuer and other risks, and their values may fluctuate. Market risk is the risk that securities or other instruments may decline in value due to factors affecting the securities markets or particular industries. Issuer risk is the risk that the value of a security or instrument may decline for reasons specific to the issuer, such as changes in its financial condition. More particularly, the strategy invests in smaller companies which may be more susceptible to price swings than larger companies because they have fewer resources and more limited products, and many are dependent on a few key managers.