CoreWeave’s tricky road to public markets has shown that investors have become highly sensitised to IPO risks, even for the hottest sectors.

The New Jersey company offers cloud-based graphics processing unit infrastructure to artificial intelligence (AI) developers – in theory, a segment that investors need to track. However, its tilt at the IPO market could have been a case of the right deal at the wrong time.

Hype around the AI asset class has clearly diminished since the start of the year after DeepSeek revealed that a cheaper and more cost-effective model was possible.

Having said that, it would be foolish to say that CoreWeave’s struggles to gain IPO traction imply fundamental issues with AI. As ECM Pulse wrote last week, CoreWeave was attempting to come to market at a gargantuan valuation, when looking at its current financials anyway, with a host of idiosyncratic issues that would plague any IPO candidate.

The company is heavily indebted and relies almost entirely on a single customer, Microsoft. Its growth, while impressive so far, is not guaranteed, and there is a risk the company may miss its targets in the months and years ahead, the company itself disclosed in its S-1 filing.

Investors seemed to take this on board when placing orders. According to an anonymous investor survey issued by RBC and seen by ECM Pulse, 90% of those surveyed did not feel CoreWeave had a sustainable moat to protect its business.

Investors highlighted a host of other issues that made them reticent about the IPO. In the end, to get the deal across the line, CoreWeave restructured the transaction, reducing its valuation target by pricing the IPO below its initial USD 47 to USD 50 range at USD 40 per share, and shrunk the deal to USD 1.5bn from a USD 2.7bn initial target size. It also brought in Nvidia, a key shareholder and supplier of its chips, to anchor the listing.

CoreWeave’s shares closed flat to the IPO price at USD 40 each on Friday, 28 March, its first day of trading. The shares opened down on the day before trading up slightly above the issue price, it then lost some momentum at the end of the day to finish flat. While this was likely a bit of a disappointment, the Nasdaq composite fell 2.7% on the same day.

Knock-on effects unclear

Several bankers noted that CoreWeave’s struggles bode badly for the IPO market in the US and Europe, with investors clearly nervous about the risks associated with new listings.

“People have just been looking at this CoreWeave and hoping that this is not another Venture Global,” said one banker, referring to the US liquid natural gas producer that listed at a huge valuation earlier this year. It is trading over 60% below the offer price.

“Investors just don’t want to take duration risk,” one of the bankers said. “There are several funds we speak to who are looking at all deals we do and are aiming just to generate first-day returns, while there is growth in investor interest in ECM and people are raising funds for it, the buyside is exhausted by this market.”

The market is now watching to see whether CoreWeave’s debut impacts appetite for other listings, with US markets still reeling in the wake of increased volatility.

Buy-now-pay later firm Klarna and ticketing platform Stubhub have both filed for New York IPOs, with the former targeting a launch in April.

One US ECM banker, speaking on the morning of 28 March, CoreWeave’s first day, said that the company’s listing woes is going to put “a damper on” the IPO market.

“Banks really need to be cautious about how they price things, and we haven’t seen that at all this year,” this banker said, adding that the IPO market is still open. However, it’s a buyer’s market and both issuers and their advisors “need to stop pretending it isn’t.”

Not all issuers are rattled. Klarna, for one, remains committed to an April IPO window, according to a source close to the company.

The source insisted that any comparison with CoreWeave only goes so far and that investor composition and early feedback have been materially different.

StubHub, meanwhile, is keeping its options open. A source close to this deal said no firm decision has been made on execution timing, giving the team leeway to adapt should market conditions deteriorate.

Meanwhile, in Europe, most of the immediate IPO pipe has been put on hold while market volatility persists.

Fundamentals not FOMO

One issue with CoreWeave’s IPO was the lack of downside protection, according to one investor, who also reviewed CoreWeave’s late-stage private rounds. This investor declined to invest in the business despite its AI credentials. “It’s a strong business, but the terms weren’t there.”

Several others seemed to also have adopted a laser focus on CoreWeave’s fundamentals rather than being swept up in the AI wave. The RBC survey, for example, contained pages of detailed feedback and several sell-side sources speaking to ECM Pulse throughout the IPO process commented on the depth of investor feedback surrounding the business.

“Investor feedback on the IPO that we have seen was phenomenally detailed,” said the second banker.

The same rules apply across the Atlantic.

In Europe, much of the continent’s IPO activity has been postponed or cancelled in the wake of increasing market volatility, as covered by this column last week.

Attention in Europe now seems to be turning towards the second half of this year and what bankers hope will be a high enough quality cohort of deals to survive any lingering market nerves. There is a growing acceptance that any IPO brought to market in the months ahead is likely going to have to be for exceptional companies to pass investors’ quality bar.

Top of the list for Europe is Verisure, the Swiss-headquartered security systems, which this news service reported last week had accelerated IPO plans to possibly list in the second half of 2025.

“Everyone wants to invest in Verisure,” the same banker said. “We have had a huge amount of reverse interest on that name, and if you look at the profile, it makes sense.

“You have management that has been there for many years and financial numbers that go back over a decade, this is a business that makes money and has shown its business model works across several cycles; it’s the sort of asset people need at this stage.”

The banker added, “It is not aggressively exciting, but it is a proper proven business.”

Investors have become increasingly discerning around IPOs, and in difficult markets, only the best will do.