The 2026 IPO Wave and the Disputes It Will Bring

The Liquidity Moment

Goldman Sachs projects that U.S. IPO proceeds in 2026 could reach $160 billion — a fourfold increase from the prior year. SpaceX is preparing a listing at a valuation of up to $1.5 trillion, which would make it the largest IPO in history. Anthropic, valued at $380 billion after its latest round, prepares for the IPO. With a backlog of 300 to 400 companies waiting to list, the IPO window — shut since 2021 — is now decisively open.

For venture capital and private equity funds that deployed capital during the 2019–2022 cycle, this is the first real test. Portfolio companies are approaching liquidity events, and funds will be expected to distribute proceeds to their investors.

This is also when disputes begin — and both sides of the table should be prepared.

The reason is structural. As long as a fund holds illiquid assets, the relationship between a general partner and its limited partners operates largely on trust. Valuations are internal. Performance is reported, not verified. Shares are held, not sold. But when a portfolio company goes public or gets acquired, the numbers become real. Auditors examine the books. Investors compare what they were told to what they actually receive. And discrepancies — if they exist — become visible.

The SEC has noted this pattern repeatedly: misconduct in fund management tends to surface precisely when assets transition from illiquid to liquid. The enforcement record of the past five years confirms it.

If You Manage a Fund

Fund managers approaching a distribution event should assume that every representation made to investors during the holding period will be scrutinized. The areas that generate the most litigation are predictable.

Valuation accuracy is the first exposure. If your fund reported a portfolio company at a $200 million mark in the last quarterly statement, and the IPO prices the company at $80 million, your investors will want to understand the gap. The difference between a legitimate downward revision and a pattern of systematic overvaluation is the difference between a difficult conversation and a lawsuit. In SEC v. Infinity Q Capital Management (2022), the fund's chief investment officer manipulated third-party pricing inputs and fabricated valuation committee minutes to overstate assets by more than one billion dollars. He collected $26 million in unauthorized distributions before the scheme collapsed. He was sentenced to 15 years.

Chain of title is the second. If your fund acquired pre-IPO positions through intermediaries, SPVs, or secondary brokers, confirm now — before the liquidity event — that the fund actually holds what it reported to investors. In SEC v. StraightPath Venture Partners, the defendants raised over $410 million from approximately 2,200 investors for pre-IPO share acquisitions, but the SEC alleged a share deficit: investors were promised more shares than the firm actually held. In November 2025, a jury found the defendants guilty on all counts. A parallel scheme involving Raymond Pirrello, charged in December 2023, raised $528 million from over 4,000 investors through similar pre-IPO offerings with undisclosed markups of up to 150 percent.

Distribution mechanics are the third. Your partnership agreement contains a waterfall — return of capital, preferred return, carried interest split — and your LPs likely have side letters that modify those terms. Does the waterfall apply on a deal-by-deal basis or across the entire fund? Can you distribute securities in-kind? Did you grant inconsistent side letter provisions to different investors without proper disclosure? The SEC's September 2024 action against Galois Capital Management found that the fund misled investors about its custody practices and applied inconsistent redemption terms to different investors.

The practical message for GPs is straightforward: the time to audit your own house is before the liquidity event, not after. Review your reported marks against current realizable values. Confirm chain of title for every material position. Re-read your side letters and make sure your distribution plan is consistent with all of them. And if there are problems, address them proactively — the enforcement record shows that concealment always makes it worse.

If You Are an Investor

Limited partners approaching a fund's first major distribution should not assume that everything they have been told is accurate. The past five years have produced enough enforcement actions against fund managers to justify a careful review.

Start with information rights. Under the Delaware Revised Uniform Limited Partnership Act, you have a statutory right to access books and records for purposes reasonably related to your interest as a partner. In the Cayman Islands, the Exempted Limited Partnership Act provides a similar framework — but recent case law has narrowed its scope. In April 2025, the Cayman Islands Court of Appeal ruled in Abraaj General Partner VIII Ltd v Abraaj ABOF IV SPV Ltd [2025] CICA (Civ) 8 that a limited partner's statutory right to “true and full information” under Section 22 of the ELPA does not grant unrestricted access to all documents held by the general partner. The court applied a functional, fact-sensitive test: the right extends only to information necessary for an LP to have “a comprehensive understanding of the business decisions being made on their behalf and the financial consequences of those decisions.” For context, Abraaj was once the largest emerging-markets private equity firm with $14 billion in assets under management. It concealed a $400 million shortfall through fabricated bank statements — a fraud dating back to at least 2014, exposed only in 2018, years after some investors first raised questions.

The practical takeaway is uncomfortable: in Cayman-domiciled fund structures, LPs may have less leverage to compel disclosure than they assume. This makes it even more important to exercise information rights early, proactively, and with specificity. A general request for “financial statements” is less useful than a targeted request for the fund's current portfolio summary with the basis for each valuation, the identity of counterparties for key positions, and the proposed distribution waterfall with side letter adjustments.

Watch for red flags. If a fund that reported consistent double-digit returns suddenly delays distributions despite a portfolio company going public, ask why. If the GP proposes in-kind distributions of illiquid securities rather than cash, understand the rationale. If the fund's reported marks seem disconnected from observable market prices, dig deeper. GPB Capital Holdings raised over $1.7 billion from thousands of retail investors while representing that distributions came from portfolio company income. In reality, the firm was using new investor capital to cover distribution shortfalls. The scheme lasted from 2015 to 2018 before unraveling. The founder was convicted of securities fraud in August 2024.

Understand your remedies. If you discover problems, the path forward depends on the nature and severity of the misconduct. Direct litigation against the GP for breach of fiduciary duties is available in most jurisdictions. Under Delaware law, the GP owes duties of loyalty and care. In the Cayman Islands, the Exempted Limited Partnership Act grants LPs the right to bring a derivative action when the GP has “without cause failed or refused to institute proceedings.” Clawback provisions — standard in most fund agreements — require the GP to return carried interest distributions that exceed what was owed under the final accounting. ILPA Principles recommend that clawbacks be grossed up for taxes.

The Bottom Line

The 2026 IPO cycle will be the first major liquidity test for an entire generation of funds. For many, it will also be the first time that reported performance is measured against actual market outcomes.

For fund managers: audit your valuations, confirm your chain of title, reconcile your side letter obligations, and prepare a distribution plan that is defensible under scrutiny. The enforcement record — Infinity Q, StraightPath, GPB Capital — demonstrates that problems discovered by regulators or investors carry consequences that far exceed the cost of proactive correction.

For investors: exercise your information rights now, before the distribution. Review the fund's reported marks, the proposed waterfall, and any side letter provisions that affect your payout. If something does not add up, engage counsel before the liquidity event — not after the shortfall.

The funds that managed capital responsibly have nothing to fear. But the 2019–2022 cycle produced its share of aggressive marks, unclear ownership chains, and creative accounting. The IPO wave will surface all of it.

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If you have questions about fund disputes, distribution mechanics, or LP rights in connection with upcoming liquidity events, reach out to us at info@buzko.legal.