After a long wait, “the IPO market is back.”
According to Colin Stewart, Morgan Stanley’s Global Head of Technology Equity Capital Markets. Stewart said in an interview with CNBC’s “TechCheck” on Monday that 10 to 15 technology companies may be listed before the end of 2024, and 2025 will be “a better year.”
“It’s been two and a half years and we’ve really gotten nothing,” Stewart said. He added that recent IPOs were priced well and traded well, which was “a sign of things to come.”
The lull began in 2022, when soaring inflation and rising interest rates forced investors to avoid risk, slashed technology company valuations and caused many technology companies to delay plans to go public. This is in stark contrast to the previous two years, which saw a record number of deals, some with astronomical revenue multiples.
The IPO market officially opened in September, Instant shopping cart and Clavijo.But the first real sign of momentum came last month, as Reddit Became the first IPO of a major social media company since interest Connecting chip companies with data centers in 2019 Astra Labs Trading surged on the first day.
Both stocks are trading well above their IPO prices, with Astera shares up about 145% as investors pour money into everything related to artificial intelligence.
Morgan Stanley, the lead banker on the Reddit and Astera IPOs, expects total fees to be about $37 million.
rival wall street banks Goldman Sachs Last week led the latest round of venture capital-backed technology initial public offerings. scarlet letterShares of the company that develops data management software rose 16% in its debut on the New York Stock Exchange.
Bipul Sinha, CEO, chairman and co-founder of Rubrik Inc., a Microsoft-backed cybersecurity software startup, waves a flag and takes a photo with employees during the initial public offering of the New York Stock Exchange (NYSE) in New York City, the United States, 25, 2024.
Brendan McDermid | Reuters
Stewart, who has been involved in some of the largest IPOs of the past few decades, said IPOs typically take six months to complete. He said that means companies currently considering initial public offerings may delay until next year to avoid crossover with November’s U.S. presidential election.
As for valuations, Stewart said the market has fallen from its peak in 2021, and price-to-earnings ratios in software and other technology areas are now back to 2018 and 2019 levels. But it has also been an “exhausting year.”
“What’s happened over the last six to 12 months is the market has been more willing to pay for growth again,” Stewart said. “We’re not back to 2021 levels yet, but we’re getting a fair price for growth. I Think at these prices, you’re going to start to see companies say, ‘You know, being a public company isn’t actually a bad company.’
Still, the most valuable emerging companies haven’t exited yet.The list includes Musk’s SpaceX and Stripe and Databricks.
While Stewart said he would “love to take them public,” he acknowledged that the challenge for larger companies is that “they have scale, they have growth, investors have given them a lot of capital,” and they are investing into the future.
“Unfortunately, an IPO is not in their immediate range right now,” he said. “But when it does come, they’re going to be a blockbuster.”
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