VanEck: AI Fuels ‘Zombie’ Firms as IPOs Stall

On the June 9 episode of VanEck’s podcast Trends with Benefits, Christian Munafo, head of Private Growth Strategies at VanEck, described how artificial intelligence is helping sustain weak private firms and said the IPO pipeline remains thin.

Munafo used the term ‘zombie companies’ for businesses that continue to operate and raise capital despite weak underlying economics. He attributed the phenomenon in part to investor enthusiasm for AI, which can obscure whether a private firm has durable revenue and profit models or relies primarily on external funding.

He noted that many fast-growing companies are staying private longer because private capital is plentiful and founders prefer the flexibility and privacy of remaining outside public markets. That trend reduces the number of high-growth firms available to everyday public-market investors through initial public offerings.

Munafo pointed to SpaceX as an example of a firm whose public listing could change market behavior. He suggested a high-profile IPO from a company of that size and visibility might encourage other private companies to file and could restart a stalled IPO calendar.

On how asset managers should respond, Munafo recommended building private-market capabilities. He highlighted improving sourcing, strengthening due diligence and taking part in private funding rounds as ways for investors to access and evaluate companies that may not go public.

The podcast episode was hosted by Ed Lopez, head of Product Management at VanEck, and is part of the firm’s Trends with Benefits series on finance, technology and investing. VanEck distributes mutual funds and ETFs through Van Eck Securities Corporation.

Market participants have monitored lower IPO activity in recent years. Munafo advised investors to consider private-market access and to adopt selection processes aimed at distinguishing firms with sustainable business models from those sustained by temporary capital inflows.