IPO Market’s False Dawn: Why Volume, Not Hype, Will Decide the Real M&A Comeback

For months, bankers and talking heads have been promising that the IPO and M&A market is about to roar back. The narrative is everywhere: pent-up demand, dry powder, and a backlog of unicorns just waiting for the green light. Sullivan & Cromwell’s Melissa Sawyer told Bloomberg that deal volume, not just a handful of splashy listings, will be the true marker of a real comeback. But so far, the only thing roaring is the hype machine.

Let’s cut through the noise. The reality is that, despite a few headline-grabbing deals, aggregate IPO volume remains anemic. According to Dealogic, global IPO proceeds in January 2026 totaled just $7.2 billion, down 18% year-over-year and more than 50% below the five-year average. M&A is faring slightly better, with a few mega-deals propping up the numbers, but the breadth simply isn’t there. The pipeline is clogged with companies that don’t want to take a haircut on valuation, while buyers are demanding a discount for risk. The result? Stalemate.

The backdrop is hardly helpful. Tech stocks are getting hammered, risk appetite is waning, and volatility is creeping up. The VIX may not be spiking, but cross-asset realized vol is ticking higher, especially in sectors that typically drive IPO activity. Private equity is sitting on record dry powder, over $2.6 trillion, according to Preqin, but they’re in no rush to deploy at 2021 prices. The bid-ask spread is wide enough to drive a SPAC through, and nobody wants to be the first to blink.

The real story here is that the IPO market is a lagging indicator, not a leading one. When deal volume finally picks up, it will be because fundamentals have improved, not because a few unicorns got out the door. The current crop of deals is mostly defensive: spin-offs, carve-outs, and companies with urgent liquidity needs. The days of “growth at any price” are over, at least for now.

Cross-asset flows tell the same story. Money is rotating out of high-beta growth and into cash, staples, and short-duration credit. The IPO window is technically open, but the air inside is stale. Until we see a sustained pickup in risk appetite, measured by both volume and breadth, the M&A comeback will remain a mirage.

Strykr Watch

Watch the deal calendar, not the headlines. The real signal will be a surge in filings, not just a few high-profile debuts. Track the ratio of withdrawn to completed deals: it’s still elevated, a sign that sellers are balking at market terms. Monitor sector flows, if tech and healthcare start to see renewed inflows, that’s your cue that risk appetite is returning.

On the technical side, watch for a break in the IPO ETF (IPO) above its 200-day moving average. Until then, the trend is sideways at best. M&A arbitrage spreads remain wide, reflecting skepticism that announced deals will actually close. If spreads start to tighten, that’s a green light for risk-on.

The wild card is the Fed. If Powell’s probe resolves and Warsh takes the reins, expect a knee-jerk move in rates and a possible re-pricing of risk assets. That could either slam the door on new issuance or, paradoxically, trigger a rush to market before conditions deteriorate further.

The risk is that the “comeback” narrative gets ahead of reality. If the next crop of IPOs trades poorly, sentiment could sour fast. Remember, in 2022, a string of busted deals triggered a six-month freeze. The same dynamic is in play now, with even less margin for error.

On the opportunity side, the best trades are in the secondary market. Look for post-IPO dips on quality names with real earnings. M&A arb remains attractive, but only for deals with minimal regulatory risk. If volume picks up, be ready to rotate into high-beta sectors.

Strykr Take

Don’t buy the hype. The real M&A and IPO comeback will be about volume, not vapor. Stay nimble, watch the calendar, and be ready to pounce when the real signal flashes green.