From: allin
The recent political shift and anticipated regulatory changes are expected to significantly influence the landscape of Initial Public Offerings (IPOs) and mergers and acquisitions (M&A) [00:23:50]. A key factor is the perceived end of stringent regulatory oversight, particularly from figures like Lina Khan, coupled with a renewed sense of economic optimism [00:23:01].
The Regulatory Environment Shift
The election outcome has led to an outlook where policies are viewed as stimulatory, featuring lower tax rates and increased deregulation [00:11:01]. This deregulatory approach is seen to benefit markets that have been hampered by regulatory oversight and challenges, such as crypto, finance, and fintech [00:11:10]. These sectors are expected to benefit by being able to launch products and generate revenue more quickly [00:11:27].
Specifically, changes at key regulatory bodies are anticipated:
- SEC: Donald Trump has expressed intent to fire SEC Chairman Gary Gensler, potentially on day one of his term [00:08:44]. While a president cannot directly fire the SEC chair before their term ends in 2026, Gensler could resign [00:09:33]. Gensler’s recent press release, stating “it’s been a great honor to serve,” was interpreted by some as a signal of his intent to step down [00:09:50].
- FTC: The “wrath of Lena Khan” is expected to come to an end [00:30:01]. While some of Lena Khan’s actions, particularly against big tech, garnered support from populist Republicans like JD Vance and Matt Gates for challenging monopolies [00:36:14], her approach was sometimes seen as not sufficiently targeted or surgical, leading to a chilling effect on M&A, particularly in the small tech environment [00:37:01]. The hope is that her replacement will continue to apply pressure to large tech companies while improving the environment for smaller tech M&A [00:37:10].
Impact on IPOs
The number of IPOs has been historically low in the past three years, akin to levels seen during the 2008-2009 Great Recession [00:22:02]. Similarly, venture capital distributions have been significantly down, with 2022-2024 combined totals being less than 2019 alone, and only about 14% of the 2021 peak [00:22:22].
Despite this, there is optimism that the IPO market could rebound. Companies like Klarna have already filed for IPOs [00:30:30]. Other companies that could potentially go public in 2025 include Databricks, Stripe, Wiz, Canva, Plaid, Rippling, and Airtable [00:23:39]. There’s speculation about SpaceX potentially IPOing its Starlink unit [00:23:52], and even a long shot that Sam Altman might take OpenAI public [00:24:00].
However, some experts remain subdued about the prospects for a significant IPO surge. The current 10-year Treasury yield at 4.5-5% makes it less compelling for SaaS or internet businesses that missed the zero-rate period to go public, as their fair value may not be attractive [00:24:49]. The existence of safer investments, like T-bills yielding 4.5%, challenges the risk-reward proposition for risky assets like IPOs [00:26:01].
Nonetheless, there’s a strong sentiment that the market is becoming more risk-seeking [00:13:21]. For fintech and certain finance companies, deregulation and potentially reduced taxes could accelerate earnings, making their current multiples appear more attractive over a 5-10 year forecast [00:26:50]. There’s also “backed up inventory” of companies that haven’t gone public, with venture capitalists, boards, and founders experiencing “exhaustion in the market” [00:29:28]. The success of recent post-IPO rebounds for companies like Robinhood, Uber, Reddit, DoorDash, and Instacart might encourage others to “take the haircut” on valuation and go public [00:31:06].
Impact on Mergers & Acquisitions (M&A)
There’s a prevailing “backroom buzz” that the new administration will “make M&A great again” [00:22:56]. This is attributed to the anticipated end of the Lina Khan era at the FTC, tech giants sitting on massive amounts of cash, and a psychologically optimistic market [00:23:01].
While some foresee a boom, others, like Chamath Palihapitiya, believe M&A activity will remain “pretty subdued” [00:24:13]. He argues that truly accretive deals should not be dependent on the “emotional regulation or disregulation of the FTC commissioner” [00:25:37]. High interest rates also make it difficult to pull off very large M&A events [00:25:50].
A key debate revolves around whether the largest tech companies will be allowed to participate in M&A. Some believe that companies like Google are “handicapped” from making acquisitions due to ongoing concerns about regulatory scrutiny and the desire to avoid a “regulatory sledgehammer” [00:32:27]. This is also fueled by populist Republicans who want to “break up big tech” [00:32:24]. Google, with its monopolies in search, advertising, and YouTube, is often cited as a target for potential breakups or investigations [00:37:46].
An alternative proposal suggests that instead of the “Magnificent 7” (the largest tech companies) dominating M&A, regulations should allow companies under a trillion-dollar valuation to buy and sell each other. This would foster a “MAG 70” instead of a MAG 7, promoting competition and creating a healthier market environment by allowing mid-market cap companies to grow and challenge the established giants [00:54:01]. For instance, if Amazon couldn’t acquire Waymo, but Waymo could merge with DoorDash or Airbnb, it could create new, powerful competitors [00:54:49].
Overall, the incoming administration is expected to foster a more fluid economic environment, potentially leading to increased M&A and IPO activity, especially for companies that have been constrained by previous regulatory approaches. However, the exact nature and beneficiaries of this shift, particularly concerning the largest tech companies, remain a subject of debate [00:53:52].
Repercussions of regulatory policies on venture capital and market growth Regulatory capture and its impact on industries The role of platforms and regulators in market disruptions Impact on venture capital and investment Regulatory and risk management concerns Regulatory challenges faced by SpaceX and other industries Political influence on corporate structures and policies