CONTRIBUTORS
Jonathan Curtis
Portfolio Manager
Franklin Equity
Matt Cioppa, CFA
Portfolio Manager, Research Analyst
Franklin Equity
Key takeaways
The initial public offering (IPO) market needs a reset in pricing, not just activity. The key constraint is not issuance; it is establishing valuation frameworks that reflect how today’s companies are built and scaled.
Benchmark deals will define the next cycle. A small group of large, complex IPOs—potentially led by SpaceX—could shape how public markets value innovation across artificial intelligence (AI), infrastructure and platforms.
Value creation has shifted, raising the bar for investors. With more value realized in private markets and companies entering the stock market later, differentiation is increasingly driven from understanding businesses earlier, not simply accessing them at IPO.
Flagship IPOs could redefine how innovation is valued
When SpaceX goes public early this summer, it could mark an important inflection point: resetting how public markets value a new generation of companies that were built and scaled in private.
IPOs from flagship companies like SpaceX, Anthropic and OpenAI represent something we haven’t had in this market cycle: a clear benchmark for how large, complex, next-generation platforms are priced once they transition to public markets.
This cycle was built differently
One of the most important shifts we’ve observed over the past decade is where value is created.
Innovation—particularly across AI, software and tech infrastructure—is increasingly developed and scaled in private markets. Companies are reaching significant size, refining their business models and, in some cases, achieving profitability before ever considering a public listing.
That’s a meaningful change from prior cycles.
For many tech companies, access to private capital has expanded, liquidity options have improved and management teams have more flexibility around timing. As a result, the IPO is no longer an inevitable milestone but a strategic choice. This reflects a broader shift in how companies are built, scaled and ultimately priced.
The rise of private scale:
- US public companies down ~50% from peak
- Global unicorns (private companies valued at US$1 billion+) now exceed 1,200
- Median IPO age has nearly doubled (from six to 10–12 years)
Source: “Dream Exchange Market Report: 2025 Data Reveals 50% Decline in Total U.S. Listed Companies Since 1996 Peak; Highlights SPAC Dominance in New Offerings,” PR Newswire, January 20, 2026. In 1996 there were ~8,090 publicly listed companies, compared to 4,200 as of year-end 2025. In 2016 the number of unicorns was approximately 229.
Public markets are catching up
This dynamic has created a gap. Private markets have funded and scaled much of the current innovation cycle, while public markets have had to interpret that progress with less direct visibility.
We see that in a few ways:
- Earnings power is often clearer before companies list
- Key growth drivers, particularly in AI, are still being priced in real time
- Valuation frameworks are adjusting to a more capital-intensive, longer-duration model
As these companies list, they will contribute to a more complete picture of how innovation is priced across different parts of the technology stack.
From private markets to public indexes
Many of the companies now coming to market are doing so with clear, established roles in the tech and innovation ecosystems. They will move directly from private companies to meaningful constituents in the S&P 500, MSCI World and MSCI World Information Technology indexes, transitioning from niche exposures to core components of broad market portfolios.
This shift has key implications:
- Benchmark composition should evolve alongside the innovation cycle. As emerging leaders enter major equity indexes, benchmark composition will likely shift—reshaping sector weights, growth profiles and the characteristics of technology allocations themselves.
- Understanding companies earlier matters more. By the time a company enters an index, its role in the business ecosystem (growth drivers, capital intensity and competitive position) is already established.
In our view, this reinforces the importance of understanding companies long before they become widely held in public markets.
Investing across private and public markets can mean deeper insights, sooner
Investing in both public and private markets has become increasingly important in this environment.
Much of the insight that informs our public market views comes from observing companies earlier in their lifecycle:
- How they scale
- Where demand is forming
- How business models evolve
Our experience with private companies such as SpaceX, Databricks and Anthropic has reinforced this perspective. It is not just about exposure; it’s about context. This insight can help differentiate between short-term valuation adjustments and fundamental shifts in business quality.
A more selective cycle
While there is a meaningful pipeline of companies, we expect the next phase of IPO activity to be selective:
- Companies will need to demonstrate scalability and durability
- Profitability and earnings visibility will matter more
- Valuation discipline may be higher across public markets
Rather than a broad reopening of the IPO window, this may look more like a measured transition, where companies come to market as conditions allow.
The bottom line
The IPO market has been waiting for a reset. A flagship deal like SpaceX could be the catalyst.
If that happens, we expect a gradual increase in IPO activity, a clearer alignment between private and public valuations, and a more selective environment overall.
For investors, the opportunity is not simply accessing innovation but understanding how and when it transitions between private and public markets.
Franklin Equity team (from left to right, Sara Araghi, Matt Adams, Matt Moberg, Grant Bowers, Matt Cioppa, Joyce Lin and Sophie Wiener) visits SpaceX.
WHAT ARE THE RISKS?
All investments involve risks, including possible loss of principal.
Equity securities are subject to price fluctuation and possible loss of principal.
Investment strategies which incorporate the identification of thematic investment opportunities, and their performance, may be negatively impacted if the investment manager does not correctly identify such opportunities or if the theme develops in an unexpected manner.
Any companies and/or case studies referenced herein are used solely for illustrative purposes; any investment may or may not be currently held by any portfolio advised by Franklin Templeton. The information provided is not a recommendation or individual investment advice for any particular security, strategy, or investment product and is not an indication of the trading intent of any Franklin Templeton managed portfolio.
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