How will evolving capital markets trends and shifting SEC priorities shape IPO execution and issuer readiness in 2026? A recent CLE webinar analyzed 2025’s pivotal market, legal, and regulatory developments and looked ahead to opportunities and risks shaping 2026’s issuance landscape. Below are key takeaways from the discussion featuring Fenwick partners Jen Hitchcock and Chelsea Anderson, along with Morgan Stanley’s head of equity execution, Rizvan Dhalla.
Market Rotation and Investor Sentiment Trends Driving 2026 Outlook
The capital markets entered 2026 amid significant sector rotation. The market is increasingly focused on companies that are AI winners, threatened by AI, or not going to be significantly impacted.
Despite volatility, the outlook remains constructive. Investors are still seeking new ideas and disruption stories, particularly those leveraging AI innovation. Issuers perceived as AI beneficiaries with clear profitability paths are expected to draw stronger interest.
Legal and Regulatory Focus Areas for Public Offerings
The SEC’s 2025 priorities will continue to shape 2026 filings. A major emphasis is on accurate and balanced disclosure of AI usage to prevent “AI washing,” as well as fulsome and tailored disclosures of the related risks. The SEC is also continuing to focus on the use of non-GAAP financial measures and key performance indicators; disclosures around stock-based compensation expenses and tax liabilities associated with RSU vesting and settlement at IPO; and balanced discussions in the business narrative that avoid hype and provide a fair depiction of risk.
Practical Preparation for IPO Readiness
Issuers preparing for public listings should consider focusing early on operational readiness:
- Audit Planning: Begin Public Company Accounting Oversight Board (PCAOB) audits one to two years in advance to ensure timely completion of required audited financials, and to allow time for SEC pre-clearance of accounting positions when needed.
- Governance and Board Composition: Secure qualified independent directors, particularly those with audit committee experience. Consider whether the management team should be augmented.
- Equity Administration and Capital Structure: Transition smoothly from private platforms to public company systems, hiring internally and leveraging experienced external stock administration providers as needed; evaluate and adopt dual class capital stock structures early to maintain voting control alignment, when appropriate.
- Disclosure Systems and Communication Policies: Redesign internal information sharing practices to maintain company culture while complying with quiet period restrictions and setting expectations for public company regulatory compliance.
Market Structures and Execution Themes Shaping 2026
- Issuers and investors both leaned toward structural flexibility in 2025, and we expect those themes to persist.
- IPOs increasingly included secondary components for employees and early investors, improving post-IPO float and providing liquidity.
- Directed share programs have seen success in engaging both users and companies, while expanding these programs internationally remains challenging due to multijurisdictional regulatory requirements.
- Lockup releases have evolved to staggered earnings-based schedules rather than the traditional 180-day cliff, providing smoother post-IPO trading.
- Companies seeking agility amid unpredictable market cycles are continuing to use dual-track processes, during which they prepare for an IPO while simultaneously pursuing potential M&A paths.
Navigating 2026 Macro Variables and Opportunities
Key macro factors impacting capital markets include hyper-scaler capital expenditures, interest rate trajectory under new Federal Reserve leadership, inflation stability, and evolving geopolitical conditions. To maintain resilient performance under these conditions, companies should consider:
- Maintaining disciplined financial leverage and strong capitalization to navigate market uncertainty
- Implementing robust investor education strategies well ahead of IPO launch to build confidence and reduce valuation analysis friction
- Demonstrating credible AI strategy integration that supports both near-term margin stability and long-term competitive positioning
Key Lessons and Moving Forward
There will be continued opportunity in 2026 for well-prepared issuers with strong fundamentals, transparent reporting, and strategic flexibility. Companies that invest early in audit, governance, and disclosure readiness, while clearly articulating AI-driven advantages and profitability paths, may be positioned to access capital amid shifting investor sentiment.
Register to view the full webinar, and learn more about Fenwick’s capital markets capabilities.