(Bloomberg Opinion) — Buy-now-pay-later firm Klarna Group Plc is among a string of companies bringing US public stock offerings in what looks like an extremely busy September for investment bankers. There’s a window for doing deals that’s currently wide open after an unusually placid summer for financial markets, which has squashed volatility in bonds, currencies and equities. Bankers and executives will want to try to use this for listings, other fundraisings or mergers and acquisitions as swiftly as possible, just in case it slams shut.
With President Donald Trump bashing the Federal Reserve and trying to force rate-cutting yes-members onto its board, there’s an eerie complacency about his ability to spark another crash in investor sentiment at the drop of a Truth Social post. Also, conditions aren’t perfect anyway: Klarna’s initial public offering aims to value the business at least $1 billion below the $15 billion-plus target the lender had earlier in the year.
An anticipated big revival in investment banking has failed to materialize this year after the long fallow spell when high interest rates paralyzed private equity and damped dealmaking and IPOs. When 2025 got going, Trump’s tariff wars have been bigger, broader and more chaotic than executives had assumed, while the financial deregulation he promised has been slow to enact.
Now, investors and other world leaders have become used to his style once more and gained confidence to act even while economic uncertainty continues and wars fail to be ended. The VIX Index of stock market volatility has traded consistently below 20 points since the middle of June — when it’s above that level, IPOs are generally seen to be impossible to do. Lower stock volatility also helps with M&A, and banks like JPMorgan Chase & Co. and Goldman Sachs Group Inc. got a boost at the end June when some big deals finally closed and advisory fees could be booked.
Recent months have seen several strong stock debuts, such as stablecoin issuer Circle Internet Group Inc. and AI-related software business CoreWeave Inc. Figma Inc., another AI-linked software firm that listed only in July, is still trading two-thirds above its $33-per-share IPO price after falling from a wild opening week that took it as high as $143.
All this has improved the mood. Even before September’s activity, third-quarter investment banking fees were up 13% versus the same period last year, led by a 39% increase from equity capital markets and M&A advisory, up 19%, according to Anke Reingen, an analyst at RBC Capital Markets. Full-year consensus forecasts for investment-banking revenue have also been lifted in recent weeks, especially for big US firms, Reingen adds. However, that follows heavy downgrades over the first few months of 2025, and the upshot is that expectations have recovered to being flat versus 2024.
The pool of attractive companies remains limited beyond AI-related and fintech firms. UK-based Revolut Ltd., for example, has been working on a private sale of existing shares to allow employees and earlier investors to cash out some stock at a valuation of $75 billion – an eye-watering sum that is 19 times 2024 revenue.
Klarna’s listing looks like a bargain next to that: At a $14 billion valuation, the top of its expected price range, it would be worth just five times 2024 revenue. This is partly explained by idiosyncratic features of Klarna next to other fintechs. On the plus side, it’s cut costs and used technology to ensure it is profitable before listing; on the other hand, consumer-credit losses, a big portion of expenses, could worsen dramatically in a downturn, according to analysts at Pitchbook.
And not all fintechs have done well: US digital bank Chime Financial Inc. now trades below its $27-per-share issue price from mid-June, for example.
Private equity remains the big spanner in the works blocking a real rebound for investment banks. A healthy IPO market through the autumn could help fund managers pursue much-needed business sales to free up space and capital for more deals, although unorthodox routes to return cash to their investors continue to grow through continuation funds and a variety of risky, esoteric refinancing options — none of which are healthy in the longer term.
Away from that, there’s plenty of appetite among lenders to support new buyouts: Credit spreads for junk-rated debt are low, while secondary prices for leveraged loans are healthy. This month has also seen a flurry of new collateralized loan obligations, which invest in buyout debt.
But these sanguine conditions exist against a backdrop of stubbornly high government bond yields and concerns about persistent inflation and heavy public borrowing in the US and much of Europe. And while industry and finance have adjusted to Trump’s mercurial policymaking and leadership of the US, he hasn’t lost the power to shock with some new wild decision.
Bankers should feel happier than six months ago; but don’t start popping the champagne just yet.
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This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Paul J. Davies is a Bloomberg Opinion columnist covering banking and finance. Previously, he was a reporter for the Wall Street Journal and the Financial Times.
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