Natalia Kniazhevich
3 min read
In This Article:
(Bloomberg) -- An increasing number of small-capitalization companies are going public this year despite the Russell 2000 Index’s underperformance, as investors shrug off trade and inflation risks in search of returns.
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“The investment community is thirsty again for IPOs,” said Will Braeutigam, US capital markets transactions leader at Deloitte & Touche LLP.
There have been 94 IPOs in 2025 excluding blank-check companies, raising $12.9 billion, compared with 73 deals raising $16 billion in the same period a year ago, data compiled by Bloomberg show. Meaning not only are more companies going public this year, they’re also smaller on average. MNTN Inc., Hinge Health Inc., Aspen Insurance Holdings Ltd. and Chinese tea chain Chagee Holdings Ltd. are among the firms to go public recently with market valuations of $5 billion or less.
MNTN and Hinge debuted on May 21, and MNTN has soared more than 60% since then, while Hinge Health is up almost 30%.
“It’s a positive signal as small cap IPOs start to access the capital markets and do it so successfully,” Braeutigam said.
The success of smaller companies is hardly a given in an environment filled with uncertainty, from US President Donald Trump’s ever-changing trade pronouncements to the path of interest rates as the Federal Reserve monitors the rate inflation and the state of the labor market. That may explain why the small-cap Russell 2000 has underperformed its rivals in the first half of 2025, falling almost 7% while the S&P 500 Index is roughly flat and the technology heavy Nasdaq 100 Index is up 1.9%.
Small-caps were expected to benefit from Trump’s aggressive trade agenda since they typically are locally focused and have less international exposure. But the Russell 2000 plunged into a bear market in early April when Trump’s tariff announcement ignited fears of slowing growth and a potential recession.
But that hasn’t derailed small-cap IPOs, since the market is more interested in specific companies and sectors than broader benchmarks.
“If you’re going public, you’re less focused on the index and more focused on more specific comparisons similar to your business,” said Effram Kaplan, managing director at the Cleveland-based investment bank Brown Gibbons Lang & Co. “There’s more of a sector aspect to the IPO market on the small-cap side.”
The strong performance of the latest small-cap IPOs shows investors’ enthusiasm for technology. However, firms from economically-sensitive sectors like building materials producer Titan America SA or energy producer Infinity Natural Resources Inc. gained less than 5% after going public.
