- Morgan Stanley, which led the Reddit and Astera Labs IPOs, expects 2025 to be a “better year” with 10 to 15 more technology offerings this year.
- Colin Stewart, head of the bank’s tech equity capital markets practice, told CNBC that valuations are back to 2018 and 2019 levels.
- “What’s happened over the last six to 12 months is that the market has gotten used to paying for growth again,” Stewart said.
After a long period, “the IPO market is back.”
Colin Stewart, global head of technology equity capital markets at Morgan Stanley. Stewart said in an interview with CNBC’s “TechCheck” on Monday that 10 to 15 more tech companies could go public by the end of 2024, and that 2025 has another “good year” ahead. Ta.
“It’s been a long two-and-a-half years, but nothing really happened,” Stewart said. Recent IPOs have been well priced and traded well, which “bodes well for the future,” he added.
The lull began in 2022, when soaring inflation and rising interest rates drove investors away from risk, drove down valuations of tech companies, and caused many to delay plans to go public. This was in sharp contrast to the past two years, which saw a record number of deals involving astronomical revenue multiples.
The IPO market opened in September with the debuts of Instacart and Klaviyo. But signs of real momentum emerged last month, with Reddit becoming the first IPO for a major social media company since Pinterest in 2019 and data center connectivity chip company Astera Labs soaring on its first day of trading.
Both stocks traded well above their offering prices, with Astera up about 145% as investors poured money into everything related to artificial intelligence.
Morgan Stanley was the lead banker for the Reddit and Astera IPOs and was in a position to collect fees totaling about $37 million.
Wall Street rival bank Goldman Sachs led the latest venture-backed tech IPO last week. Rubrik, which makes data management software, soared 16% in its listing on the New York Stock Exchange.
CEO, chairman and co-founder of Microsoft-backed cybersecurity software startup Rubrik, Inc. during the company’s IPO on the New York Stock Exchange (NYSE) in New York City, USA, in April. A certain Mr. Bipul Sinha waves a flag while posing with employees. 25th, 2024.
Stewart, who has worked on some of the biggest IPOs of the past few decades, said it typically takes six months for an IPO to reach the finish line. That means companies currently considering IPOs are likely to postpone their IPOs until next year to avoid conflicts with November’s U.S. presidential election, he said.
On valuations, Stewart said the market has retreated from its peak in 2021, with stock prices in software and other parts of technology now back to levels seen in 2018 and 2019. Stewart called 2021 a “great year” but also a “tiring year.” . ”
“What’s happened over the last six to 12 months is that the market has gotten used to paying for growth again,” Stewart said. “We’re not back to where we were in 2021, but we’re getting a fair price for growth. And at those kind of prices, companies can say, ‘You know, it’s actually not bad to go public.’ I think the company is starting to say that. ‘”
Still, the most valuable late-stage companies have yet to exit. That list includes Elon Musk’s SpaceX, as well as Stripe and Databricks.
Mr. Stewart said, “I would love to go public,” but the challenge for major companies is that “they have scale, they have growth, and investors are providing a lot of money” and are making investments. I admitted that. Toward the future.
“Unfortunately, an IPO does not appear to be happening in the near future at this time,” he said. “But if it actually happens, it will be a huge hit.”
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