23rd March, 2024 – This week saw an unprecedented rise in the IPO tech market, bringing to end a prolonged period of drought triggered by the public offering of Reddit and Astera Labs. The two companies, which patrolled the same world within the tech-investment space, represented the first known venture-backed tech flotation in the U.S. since September.
Morgan Stanley emerged as the ultimate victor among other banks, landing the title lead position of both IPOs in the victory of dry spell which the bank had been experiencing. The revival follows after a period of stagnancy in the tech IPO market, with only 15 tech IPOs occurring in the past 2 years since 2021 which have proved to be bullish. The number of IPOs has been on the decline over the past several years to an extent that even the major investment banks like Goldman Sachs and Morgan Stanley have been forced to lay off staff.
By interpreting IPO activities this week as a positive sign for the future, market professionals actually say there will be more companies going public in the second quarter. This enthusiasm will be well accepted by Morgan Stanley, since it generated profit fees from its contribution to Astera and Reddit’s IPO’s, potentially paving the way for the renewal of its investment- banking side.
Astera Labs, a company focusing on data center connectivity chips, saw its first day on NYSE incredibly strong, with 72 % increase, showing broad investors’ appetite for AI-related investment. Concurrently, Reddit made a huge buzz with its IPO, and its shares rose as high as 48% upon the first trading day. However, it slightly dipped in the amount.
Alongside the return of tech IPOs are the chances for investment banks to gain from placing this category of stocks, as well as the prospects of further partnerships in the form of follow-on offerings, debt raises and acquisitions. Additionally, innovative strategies like directed-share programs (DSPs) employed by Morgan Stanley in both Reddit and Astera IPOs serve as a means to attract new customers and enhance wealth management services.
Author: Simona Merlo