More Tech Company IPOs on the Horizon!
According to Colin Stewart, Global Head of Technology Equity Capital Markets at $Morgan Stanley(MS)$ , after a long wait, the IPO market is back in business.
We could see 10 to 15 tech companies going public by the end of 2024, and 2025 is shaping up to be even better. It's been two and a half years of nothingness, really. Recent IPOs have been priced high and traded well, signaling good things to come.
The calm period started in 2022 when inflation skyrocketed and interest rates rose, causing investors to play it safe, slashing tech company valuations significantly and delaying many IPO plans. This was a stark contrast to the previous two years when trading volumes hit historic highs, with some deals reaching astronomical valuations.
In September, the IPO market officially started heating up with listings from $Instacart, Inc. (Maplebear Inc.)(CART)$ and $Klaviyo, Inc.(KVYO)$ . But the first real momentum came last month when $Reddit(RDDT)$ became the first major social media company to IPO since $Pinterest, Inc.(PINS)$ in 2019, and data center connectivity chip company $Astera Labs, Inc.(ALAB)$ saw its stock soar on its debut.
Both stocks are currently trading well above their IPO prices, with Astera's stock up about 145% as investors pour money into all things AI-related.
Morgan Stanley led the IPOs of Reddit and Astera, expecting to rake in a total fee of around $37 million.
Wall Street rival $Goldman Sachs(GS)$ led the latest round of venture capital-backed tech IPOs last week. $Rubrik Inc.(RBRK)$, which develops data management software, saw its stock rise 16% when it debuted on the New York Stock Exchange.
Stewart noted:
IPOs typically take six months to complete. This means companies currently considering IPOs might delay until 2025 to avoid clashing with the November U.S. presidential election.
The market has cooled off from its peak in 2021, with software and other tech sectors' price-to-earnings ratios now back to 2018 and 2019 levels.
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