IPO Momentum: All the Way to Outer Space?

By Lynne Kostakis, Executive Director of Alternative Investments, in collaboration with Eric Freedman, Wealth Management Chief Investment Officer

This information is intended solely for clients or potential clients of Northern Trust Wealth Management. Alternative investments are available only to qualified investors and are not suitable for all portfolios. These strategies often involve limited liquidity, complex structures and additional tax reporting, including K‑1 filings. Allocating to alternative investments within a diversified portfolio may require tolerance for greater administrative complexity, delayed reporting and information, and a higher degree of risk, including loss of capital. References to specific securities, companies or market events are for illustrative purposes only and should not be construed as recommendations, endorsements or investment advice.

Companies are staying private longer, accruing much of their value before going public, while indices are adapting rules to rapidly incorporate mega-cap IPOs in benchmarks.

The IPO market has regained momentum in 2026, led by a new generation of AI-driven companies coming to market at unprecedented scale. However,  the implication for investors is not just that issuance has returned; it is that the path from private growth to public ownership is evolving. Companies are generally remaining private longer, which may allow a greater share of enterprise value creation to occur before an IPO. At the same time, some index providers are moving more quickly to incorporate large new listings into major benchmarks. Together, these shifts are changing when investors gain exposure — and how much of the growth cycle may have already occurred by the time a company enters public portfolios.

What is different about the IPO market in 2026?

The first half of 2026 has marked the strongest start for IPOs in the past five years, raising over $110 billion, including the largest IPO in history with Space Exploration (SpaceX), which raised $86 billion alone.¹ AI-related sectors have driven much of the activity, mirroring broad enthusiasm for businesses tied to the technology ecosystem.

SpaceX, the largest IPO in history, reflects the unprecedented scale at which companies are now debuting. Still, renewed activity does not signal broad-based enthusiasm for every deal. Recent post-IPO debut performance has varied, with dispersion reflecting increased selectivity and differences in perceived value and confidence in earning power: At the time of writing, eight out of the 15 largest U.S. IPOs of 2026 are trading above their IPO price.²

Market participants expect several additional high-profile mega IPOs, defined as deal sizes with at least $5 billion raised or listings valuations of $50 billion or more, in 2026 and 2027. This could represent one of the most significant IPO cycles in recent history, driven by a combination of private market backlog, the capital intensity of AI-driven business models, and mounting liquidity needs across venture ecosystems.

We do not attempt to predict the timing or scale of future IPOs, but their growing significance for portfolio construction is increasingly clear. Two key considerations stand out: how public markets and indices may adapt to accommodate these large-scale listings, and the opportunity set available to investors while companies remain private.

What are the implications of earlier index inclusion?

Broader investor participation in the stock, but also potentially increasing concentration in a small number of growth stocks.

Historically, major U.S. indices required a waiting period before newly public companies were added. Index providers designed those seasoning rules to allow time for trading history, operating results and eligibility criteria to develop.

That framework is now shifting. As companies stay private longer, they are arriving in public markets at a significantly larger scale, with many already “index-sized” on day one. Concurrently, investors are prioritizing timely index representation for companies that quickly represent meaningful portions of market capitalization. In response, index providers are adapting. The Nasdaq and Russell indices have modified rules to allow for accelerated inclusion, although the S&P recently declined to change its rules.

Faster index inclusion can amplify demand for newly public companies through passive flows and index-tracking strategies. For passive investors, earlier inclusion may drive near-term price momentum and reshape IPO aftermarket dynamics, but it also poses the risk of increasing index concentration, especially when large IPOs are concentrated in a single sector or investment style.

Where is most of the value being created today?

Increasingly, before the IPO.

The expansion of the private-company universe has changed the growth path for many businesses. As of February 2026, there were 1,590 active global “unicorns,” or startups valued at more than $1 billion, compared with roughly 200 in 2017.³  Over the same period, the time-to-IPO has increased by roughly 60%, allowing companies to scale, innovate and compound value well before entering the public markets.⁴

This structure shift has meaningful implications — including how eligible investors evaluate the available growth opportunity set and how private-market exposure plays a role in a diversified portfolio.

Returning to SpaceX, we can see this dynamic. Early investors entered their first funding round in 2012 at an approximate valuation of $1.3 billion.⁵  Over the following decade and a half, capital raises drove the company’s valuation to roughly $800 billion by late 2025, representing a 600x increase prior to its public debut, which closed at approximately a $2.1 trillion exit valuation.^6,7 And although SpaceX stock increased another 19% on its first day of trading, tremendous value creation had occurred pre-IPO.⁸

What does early value creation mean for private investors?

Longer private lifecycles expand the opportunity set, but they also make selectivity more important.

The private market spans venture capital, growth equity and later-stage capital, each with different risk-return dynamics. Venture capital typically funds the earliest stages, when companies are focused on product development and initial market momentum. Growth equity scales businesses with proven models, accelerating revenues. Buyout strategies often target more mature companies with stable cash flows, where the focus shifts to optimization and operational efficiency. Each stage attracts different types of investors and expertise.

Not every company goes public, however, and few achieve the size and scale of mega IPOs. Investors must distinguish between the potential for outsized returns and the probability of achieving them. Venture capital and growth equity, the segments that often produce IPO candidates, may offer compelling upside, but are also some of the most volatile and risky segments of the market. These companies often have limited operating histories, unproven business models, and uncertain profitability prospects. Outcomes are highly variable, and a substantial portion of investments may result in a partial or complete loss. Investors generally commit capital to these illiquid investments for extended periods, with limited-to-no opportunities for early redemptions or exits.

What’s the bottom line for investors?

Capital markets have seen a shift in where value creation occurs. Increasingly, much of the meaningful growth takes place before companies reach public markets. And once publicly available, index providers are moving more quickly to incorporate large new listings into benchmarks, shortening the path from IPO to public portfolio exposure.

For investors, this underscores the importance of thoughtfully incorporating private and public investments, where eligible, into a well-constructed and diversified portfolio. Success will depend on balancing access to innovation-driven growth with disciplined risk management in an increasingly complex and dynamic investment landscape.

 

¹ CNBC. “SpaceX IPO Raise Hits $85.7 Billion After ‘Greenshoe’ Is Exercised.” https://www.cnbc.com/2026/06/15/spacex-ipo-spcx-greenshoe-overallotment.html. Accessed 22 June 2026.

² Morningstar. “As SpaceX IPO Anticipation Heats Up, What 2026’s Biggest IPOs Say About Investor Demand.” https://www.morningstar.com/news/marketwatch/2026060998/as-spacex-ipo-anticipation-heats-up-what-2026s-biggest-ipos-say-about-investor-demand. Accessed 22 June 2026.

³ PitchBook. “Tech Unicorn Companies List & Tracker.” https://pitchbook.com/news/articles/unicorn-startups-list-trends. Accessed 22 June 2026.

⁴ Morningstar. “3 Ways Private Companies Are Reshaping Public Markets.” https://www.morningstar.com/funds/3-ways-private-companies-are-reshaping-public-markets. Accessed 22 June 2026.

⁵ New Space Economy. “From Near-Bankruptcy to $1.75 Trillion: The Extraordinary Valuation History of SpaceX.” https://newspaceeconomy.ca/2026/06/05/from-near-bankruptcy-to-1-75-trillion-the-extraordinary-valuation-history-of-spacex/. Accessed 22 June 2026.

⁶ Forbes. “SpaceX Valuation Soars on Record Launches, Starlink Growth.” https://www.forbes.com/sites/greatspeculations/2025/12/16/spacex-valuation-soars/. Accessed 22 June 2026.

⁷ CNBC. “From 10% Chance of Success to $2 Trillion Market Cap: SpaceX’s Historic IPO.” https://www.cnbc.com/2026/06/13/from-10percent-chance-of-success-to-2-trillion-spacexs-historic-ipo.html. Accessed 22 June 2026.

⁸ CNBC. “SpaceX (SPCX) IPO: Live Updates.” https://www.cnbc.com/2026/06/12/spacex-ipo-spcx-live-updates.html. Accessed 22 June 2026.

⁹ Morningstar. “Private Assets Are Redefining How Portfolios Are Built.” https://www.morningstar.com/funds/private-assets-are-redefining-how-portfolios-are-built. Accessed 22 June 2026.