The New York Stock Exchange welcomes Reddit, Inc. (NYSE: RDDT) to celebrate its initial public offering. To mark the occasion, Snoo rang the Opening Bell®.
New York Stock Exchange
Wall Street’s tech IPO bankers may finally have a reason to pop the champagne this week as tech stocks debut on the market, breaking a long drought. Reddit and Astra Labs.
Although Reddit and Astera occupy very different areas of the technology market, they are the first notable venture-backed technology companies to go public in the United States since 2017. Instant shopping cart and Clavijo in September. Prior to this, no major transactions had occurred since late 2021.
Morgan Stanley was a big winner among banks, taking a coveted lead in both IPOs. Goldman Sachs Morgan Stanley led the only two major venture-backed offerings last year, marking a long drought for the bank.The bank leads the way in IPOs bridge company and reincarnation December 2021.
According to statistics, the total number of technology company IPOs in the past two years was only 15. Research Contributed by Jay Ritter, professor of finance at the University of Florida. The market boomed in 2021, when 121 technology companies went public, the most since the dot-com bubble in 2000. Goldman Sachs and Morgan Stanley cut thousands of jobs last year, in part due to a slump in initial public offerings.
“Capital markets have been relatively quiet over the past few years,” said Eric Juergens, a partner at law firm Debevoise and Plimpton who focuses on capital markets and private equity. Investment banks “have certainly been actively pitching IPOs and other deals to clients and being ready when companies are ultimately ready,” he said.
Some market experts view the past week’s moves as a sign of things to come. New York Stock Exchange President Lynn Martin told CNBC on Thursday at the opening of trading on Reddit that many companies are working to go public in the second quarter.
That’s good news for Morgan Stanley. As lead underwriter of the Astera and Reddit IPOs, the bank received fees totaling approximately $37 million. That’s a drop in the bucket for the bank, which had net income of $12.9 billion last quarter, mostly from wealth management. But it could be a sign of recovery for the investment banking unit, which saw revenue fall 46% in the two years from the fourth quarter of 2021 to the last three months of last year.
The 12 underwriters on Astera’s IPO collected $39.2 million in fees this week, with Morgan Stanley taking one-third of the total, or about $12.9 million. An over-allotment, or greenshoe, option allows the underwriters to purchase an additional 15% of shares for clients, which would increase fees paid by $5.9 million.
Astera sells data center connectivity chips to cloud and artificial intelligence infrastructure companies. The stock soared 72% in its Nasdaq debut on Wednesday and continued to rise, rising an additional 13% over the next two days, helped by investors’ seemingly never-ending interest in the field of artificial intelligence. appetite.
“Everyone is watching”
Shares of the 19-year-old social media company rose 48% on their first day of trading on the New York Stock Exchange before falling 8.8% on Friday.
Lise Buyer, founder of IPO advisory firm Class V Group, said the market is showing signs of thawing.
“The market’s enthusiastic reception of these IPOs will certainly help open the floodgates,” the buyer said. “Everyone is looking at these. Investors, boards and management are all encouraged.”
Bankers who have been waiting for action “have to be happy about this,” she added.
Goldman SachsMorgan Stanley’s biggest rival ranked second in the Reddit IPO, accounting for about 19% of expenses. The company led the Instacart and Klaviyo IPOs last year, bringing in about $35 million in combined fee income. When SoftBank took semiconductor design company Arm Holdings public last year, barclays bank The deal was led by Goldman Sachs, with participation JPMorgan.
Arm Holdings CEO Rene Haas poses for a photo with leadership members outside the Nasdaq MarketSite in New York on September 14, 2023.
Michael M. Santiago | Michael M. SantiagoGetty Images
For investment banks, an IPO is often seen as the beginning of a relationship with a company. The future could bring follow-on offerings, debt financings and acquisitions, the specialties of Wall Street’s top firms.
Morgan Stanley is looking for another way to bring in more potential business. In both the Reddit and Astera IPOs, a portion of the equity was set aside for so-called directed stock plans (DSPs), which gave high-value customers, business partners or company insiders the opportunity to participate.
This model has been used before Airbnb, Rivian and Dosimiti, allowing premium users or early customers to participate in the IPO. For Morgan Stanley, DSPs have the potential to attract new individual clients into the bank seeking wealth management and other services.
In Reddit’s case, the company said tens of thousands of Reddit users participated in its DSP.
“Our goal is just to get them involved in the deal,” Reddit CEO Steve Huffman told CNBC on Thursday. “Just like any professional investor.”
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