Goldman tests the bubble case behind the IPO boom

U.S. IPO proceeds are on track to exceed $200B this year on ~60 deals—higher than prior norms but still far below the 1999 and 2021 peaks—prompting debate over whether this is bubble risk or “market normalization.” The article cites U.S. liquidity support from ~$1.6T returned to investors annually via dividends and buybacks, while also flagging investor digestion concerns as post-IPO lockups expire in 2027. In contrast, Hong Kong IPOs rebounded to $37B in 2025 (vs ~$10B/yr in 2022-2024) with first-3-month average returns of ~60% and Goldman projecting >$400B in annual demand.

Analysis

The market is treating issuance volume as a bubble tell, but the cleaner read is that risk capital still has a bid and is willing to monetize winners. That is constructive for capital-markets franchises first, but the P&L impulse is lagged and depends on ECM/advisory mix, not the headline count of deals. For GS, the upside is not from one blockbuster IPO; it is from a broader pipeline that lifts fee intensity and trading opportunity over the next 1-3 quarters.

The more important risk is quality, not quantity. If first-week aftermarket performance or post-listing trading weakens, issuers will either shrink ambition or demand lower pricing, which would cool the entire complex within 1-3 months and compress sentiment across recent-listing baskets. The distant overhang is lockup supply later in 2027, but that is not a tradable near-term catalyst unless the current cohort keeps pricing aggressively today.

The consensus may be overestimating the “too much supply” problem in the U.S. and underestimating the flow problem in Europe. With substantial buybacks/dividends recycling cash, domestic absorption is stronger than the bear case implies; the bigger bottleneck is whether active and passive inflows remain risk-on. In Hong Kong, the implication is more bullish for exchange/listing-adjacent economics than for late-stage issuers: if offshore Chinese equity supply keeps meeting southbound and sovereign demand, the demand-supply imbalance can persist even as gross issuance stays elevated.

Key Decisions for Investors

• Long GS vs XLF for the next 1-3 months: best direct expression of a sustained issuance window, with upside if ECM/recapitalization fees stay firm; thesis fails if Goldman’s capital-markets revenues or equity underwriting guidance rolls over.
• Do not chase newly listed IPOs in the first 30-60 days; if you want exposure, wait for the first earnings print or lockup-period setup. The risk/reward is usually better after price discovery than in the opening days when supply is still being absorbed.
• Use IPO-market strength as a sell-the-rip signal on the IPO ETF (IPO) or other new-issue baskets only if aftermarket performance deteriorates. If first-week returns stay strong, stay neutral; if they weaken, a small tactical short has better asymmetry over 1-3 months.