After a long period of waiting, “the IPO market is back.”
This is what Colin Stewart says, Morgan Stanley global head of technology equity capital markets. In an interview with CNBC’s “TechCheck” on Monday, Stewart said 10 to 15 more tech companies could go public before the end of 2024, with an “even better year” in store for 2025.
“It’s been two and a half years since we really had anything,” Stewart said. Recent IPOs have been priced high and traded well, which “bodes well for the future,” he added.
The lull began in 2022, when soaring inflation and rising interest rates pushed investors out of risk, reduced tech valuations and led many tech companies to delay their plans to launch. Initial Public Offering. This stands in stark contrast to the previous two years, which saw a record number of deals, some at astronomical revenue multiples.
The IPO market opened in September, with the debut of Instacart And Klaviyo. But the first real signs of dynamism appeared last month, as Reddit became the first IPO of a major social media company since Pinterest in 2019 and data center connectivity chip company Astera Laboratories skyrocketed on its first day of trading.
Both stocks remain well above their IPO prices, with Astera up about 145% as investors pour money into all things artificial intelligence.
Morgan Stanley was the lead banker on Reddit and Astera’s IPOs, positioning itself to raise about $37 million in total fees.
Wall Street rival Goldman Sachs led the latest venture-backed tech IPO last week. Rubricwhich develops data management software, jumped 16% in its debut on the New York Stock Exchange.
Bipul Sinha, CEO, president and co-founder of Rubrik Inc., the Microsoft-backed cybersecurity software startup, waves a flag while posing with employees during the company’s IPO on the Stock Exchange New York (NYSE), in New York, United States, in April. 25, 2024.
Brendan McDermid | Reuters
Stewart, who has been involved in some of the biggest deals in recent decades, said it typically takes six months to complete an IPO. That means companies currently considering an IPO will likely wait until 2025 to avoid coinciding with the U.S. presidential election in November, he said.
As for valuations, Stewart said the market has retreated from the peak days of 2021 and multiples in the software and other technology sectors have now returned to levels seen in 2018 and 2019. Stewart described 2021 as an “incredible year”, but also “exhausting”. “.
“What’s happened over the last six to 12 months is the market has become more comfortable with funding growth again,” Stewart said. “We’re not back to 2021 levels, but we’re getting a fair price for growth. And I think at these prices you’re starting to see companies saying, ‘You know, it’s actually not bad to be a public company.’
Yet the most valuable and late-stage companies have yet to reach exit. This list includes That of Elon Musk SpaceX with Stripe and Databricks.
Although Stewart said he “would love to take them public,” he acknowledged that the challenge for the bigger names is “they have size, they have growth, investors give them a lot of capital” and they invest. to the future.
“At the moment, the IPO is unfortunately not on the near-term horizon,” he said. “But when it happens, it will be a blockbuster.”
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