USA - NATIONWIDE: An Introduction to Capital Markets: Debt & Equity: Eastern United States

• Peter J. Loughran
• Steven J. Slutzky
• Paul M. Rodel
• Eric T. Juergens
• Benjamin R. Pedersen

U.S. capital markets activity was strong in the first quarter of 2025 amid Federal Reserve interest rate cuts and increased M&A activity, as equity and debt issuances increased from the fourth quarter of 2024. On the regulatory front, the SEC pivoted toward deregulation and digital asset integration with the confirmation of Paul Atkins as Chair.

Recent Market Activity*

U.S. equity capital markets had a strong first quarter of 2025, with 48 initial public offerings raising approximately USD8.7 billion compared to 44 IPOs raising approximately USD5.5 billion in the fourth quarter of 2024. This continuation of the historical trend of increased IPO activity following a U.S. presidential election was facilitated by a 100-basis-point cut in interest rates by the Federal Reserve from September to December 2024. The special purpose acquisition company (SPAC) IPO market remained strong, accounting for approximately USD3.4 billion in proceeds, with serial SPAC sponsors comprising most first-quarter activity. The follow-on market slowed in March, with 89 offerings totaling approximately USD35.3 billion in the first quarter of 2025, compared to 129 offerings totaling approximately USD57.6 billion in the fourth quarter of 2024. Despite overall improvement, market behavior reflects selective optimism: investors have rewarded issuers with proven cash flow and sector resilience while high-growth or speculative issuers face valuation pressure.

Debt markets were active in the first quarter of 2025. High-yield bond issuances totaled approximately USD76.4 billion across 96 deals compared to approximately USD48.7 billion in the fourth quarter of 2024, while investment-grade bond issuances surged to approximately USD557 billion from 364 deals compared to approximately USD244.9 billion in the fourth quarter of 2024, corresponding with increased M&A activity and supported by lower interest rates. After a resurgence in 2024, convertible bonds continued to be a popular tool, with 29 issuances totaling approximately USD16.5 billion in the first quarter of 2025, though this fell short of the 32 issuances totaling approximately USD27.4 billion in the fourth quarter of 2024. Private investment in public equity transactions rebounded in 2024 and 2025, with activity rising approximately 21% from 2023, offering capital to companies outside traditional public markets. Corporate spin-offs and dual-track IPO/M&A processes have gained traction as companies seek to maximize value and flexibility, with several high-profile exits announced last year. The rise in dual-track processes may also reflect issuers hedging valuation uncertainty, preparing for public and private exits amid potentially fragile investor confidence.

Activity in the first quarter of 2025 evidenced continued improvement in equity markets and strength in debt markets. However, the pause in interest rate cuts since December, along with inflation and tariff uncertainties, could challenge market momentum. Increased market volatility could, however, bolster the convertible bond market, which provides the downside protection of coupon payments alongside the upside potential provided by equity conversion. Convertible bonds may offer attractive debt refinancing possibilities given higher borrowing costs for high-yield and investment-grade debt.

Regulatory Developments

As markets recalibrated in early 2025, the SEC reoriented its regulatory posture under Chair Atkins and the second Trump administration. Aided by executive actions mandating regulatory restraint and agency accountability, the SEC has begun unwinding several Gensler-era policies, particularly in ESG, shareholder access and digital assets, appearing to prioritize capital formation, with further deregulatory measures expected.

On March 27, 2025, the SEC voted to cease defending its climate disclosure rules. However, litigation challenging the rules remains ongoing in the Eighth Circuit, and the SEC’s decision to stop defending the rules does not stay the case or rescind the rules. Although the SEC could seek to rescind the rules under the Administrative Procedure Act, statements by Commissioner Uyeda at the May 19, 2025 “SEC Speaks” conference indicate this is unlikely given the strain on SEC resources.

Additionally, the SEC is expected to reduce regulatory burdens by easing disclosure and governance requirements. On February 12, 2025, the SEC’s Division of Corporation Finance rescinded Staff Legal Bulletin (“SLB”) No. 14L and issued SLB 14M, both related to Rule 14a-8 under the Securities Exchange Act of 1934. This change has proven useful for public issuers seeking to exclude shareholder proposals from their proxy statements – particularly ESG-related Rule 14a-8 proposals on matters such as human rights, diversity, equality and governance practices. Moreover, the amendments to Rule 14a-8 proposed in 2022 are now unlikely to be adopted, and the advancement of other items on the Division of Corporation Finance’s rulemaking agenda – eg, changes to human capital management and board diversity disclosureis doubtful.

The SEC has indicated a renewed focus on capital formation, seeking to:

• repeal or ease Dodd-Frank disclosure rules on conflict minerals, mine safety, resource extraction and CEO pay ratios;
• provide that Regulation A pre-empts all state Blue Sky laws;
• broaden the “accredited investor” definition for Regulation D or eliminate the restriction altogether; and
• reconsider Rule 144 and restrictions on resales under the Securities Act of 1933. Chair Atkins’ proposed agenda signals further possible priorities related to disclosure simplification and access to capital markets.

Digital Assets

Amid accelerating digital asset adoption, the SEC is shifting from an enforcement-centric posture toward a regulatory framework focused on supporting capital formation and innovation for crypto and digital assets. In recent months, the SEC has dismissed several crypto-related enforcement actions, and Commissioner Peirce has emphasized that regulation of the crypto industry should be led by policy staff rather than the Division of Enforcement.

The SEC’s new approach to digital assets began with the issuance of Staff Accounting Bulletin (SAB) No. 122 and the rescission of SAB 121 on January 23, 2025. SAB 122 eases crypto-related accounting burdens. On February 27, 2025, the Division of Corporation Finance published a statement on meme coins, warning that they are not securities and that federal securities laws protect neither purchasers nor holders of meme coins, though fraudulent conduct related to their offer and sale may be subject to enforcement action under other federal and state laws. On April 10, 2025, the Division of Corporation Finance issued guidance on how existing disclosure rules apply to crypto-asset offerings, including business models, technology and legal risk, suggesting that the SEC recognizes that institutional demand for blockchain-based products has outpaced regulation, prompting this interim guidance. Regulatory momentum continued on May 15, 2025, when the Division of Trading and Markets issued Frequently Asked Questions easing custody restrictions for broker-dealers, supporting in-kind crypto exchange-traded fund flows and clarifying control standards under Rule 15c3-3 under the Securities Exchange Act of 1934.

Additionally, Commissioner Peirce renewed calls for a conditional exemption for tokenized securities, and a U.S.-based crypto exchange announced plans to offer tokenized U.S. equities to international users. On May 19, 2025, the Senate advanced a bipartisan stablecoin bill, and on May 22, 2025, the House of Representatives passed the Financial Innovation and Technology for the 21st Century Act, which, if enacted, would delineate oversight of digital assets between the SEC and the Commodity Futures Trading Commission.

Looking ahead, the SEC’s Crypto Task Force is expected to continue focusing on tokenization, decentralized finance and custody reform.

*All statistical and market data referenced in this article are sourced from the London Stock Exchange Group and Private Raise.