- Strong U.S. Equity Markets, SPACs, and ETFs: The U.S. equity markets are likely to kick off the year strong, as a variety of players are expected to take advantage of the early days of the incoming presidential administration. This may lead to a flurry of deals, particularly during the first three quarters, as companies seek to capitalize on favorable conditions and the markets assess the impact of the new administration on the economy and the broader geopolitical environment.
A new wave of SPAC IPOs gained momentum in late 2024 that is likely to continue into 2025, particularly as the incoming administration takes aim at accelerating business growth through deregulation and expected tax cuts impact capital gains and losses. The decline in the PIPE market to facilitate SPAC mergers will need a robust turnaround, however, to determine if the SPAC will ultimately prove to once again be a viable vehicle for alternative entry to the public markets.
Exchange-traded funds (ETFs) are also experiencing dynamic growth and change, particularly with the rise of thematic and niche ETFs that concentrate on specific trends like clean energy, technology, or emerging markets, appealing to investors interested in particular sectors or themes. As ETFs gain popularity, there is a possibility of increased regulation, with new rules potentially being introduced to ensure transparency, liquidity, and investor protection. Furthermore, innovation in product offerings, such as the creation of actively managed ETFs or those incorporating alternative assets, could provide investors with a wider array of investment options. These developments are shaping the ETF landscape by broadening the scope of investment opportunities and ensuring a more regulated market environment.
- Regulatory Changes and Digital Assets: Republican commissioners and staff attorneys at the SEC and CFTC have signaled that, while awaiting comprehensive legislation and confirmation of the new SEC chair, they intend to reduce reliance on enforcement to mold regulatory guardrails, provide increased executive relief through no-action letters, and collaborate with industry participants in crafting rules differentiating tokens as commodities from tokens as securities. In doing so, clearer regulatory guidelines could emerge, fostering a more favorable environment for blockchain investments. Individual states such as California, on the other hand, may increase their enforcement activity in 2025.
- Divergent Landscape Continues for Climate and Human Capital Disclosures: In the United States, there may be a rollback of regulations at the federal level requiring climate risk disclosures, while international issuers will still need to comply with EU and UK rules, potentially creating disparities in disclosure requirements. Similarly, there could be less emphasis on human capital disclosures, including those related to ESG (environmental, social, and governance) criteria. Investors might also reduce their demands on issuers regarding these disclosures. Meanwhile, certain states (e.g. California, Minnesota, and New York) are continuing to move forward with their climate-risk disclosure reporting regimes. In the EU and UK, the development of sustainability laws and regulations continues at a fast pace, which could influence debt and equity capital markets transactions, including corporate disclosure, product level disclosure, and ESG due diligence obligations and ratings.
- Revised Regulatory Framework for EU Equity Issuers: In the European Union, the recent implementation of the Listing Act is widely expected to represent a pivotal milestone for EU capital markets, aimed at streamlining access and reducing administrative burdens, particularly for well-established issuers. This legislative measure is anticipated to further enhance the European financial sector by simplifying the process for companies to access public markets, thereby creating a more dynamic and competitive environment and providing a more viable alternative to standard bank financing. By simplifying some of the complex offering and listing regulatory obstacles and facilitating easier market entry, the Act is expected to enhance liquidity and attract a broader range of issuers, including small and medium-sized enterprises, fostering innovation and economic expansion across member states. While it may take some time to fully benefit from all the regulatory changes aimed at addressing the concerns raised by practitioners in the field, the recent legislation clearly indicates that the EU seeks to strengthen its position as a leading global financial center.
- Anticipated Tax Policy Changes Likely to Influence Investment Strategies: Potential changes in tax policies, such as adjustments to capital gains tax rates, could significantly influence investor behavior and decision-making related to asset sales and investment strategies. With the Tax Cuts and Jobs Act of 2017 set to expire in 2025, Congress may consider extending it or implementing further tax cuts. Additionally, the use of advanced real-time tax management tools is likely to become more prevalent, enabling investors to optimize their tax positions concerning capital gains and losses. These developments could collectively impact the landscape of capital gains and losses, shaping investment strategies and economic growth.
About the Practice:
Greenberg Traurig’s Global Capital Markets Practice is recognized for its skill in handling U.S. and cross-border transactions, including initial public offerings, high yield and investment grade debt offerings, Rule 144A and Regulation S offerings for foreign private issuers, registered direct offerings, at-the-market offerings (ATMs), public and private equity line transactions, Special Purpose Acquisition Companies (SPACs), Real Estate Investment Trusts (REITs), and Private Investment in Public Entities (PIPEs). The team represents U.S. and non-U.S. public and private issuers, as well as underwriters, financial institutions, venture capital funds, hedge funds, broker-dealers, investment companies, and private investment firms in all aspects of U.S. and cross-border securities offerings. The team’s attorneys advise clients in a wide range of industries, including health care, aerospace, pharmaceuticals, gaming, medical devices, technology, financial services, life sciences, manufacturing, retail, real estate, energy, infrastructure, construction, and new and traditional media.