The IPO market is experiencing a resurgence after a lull in activity, according to Colin Stewart, Morgan Stanley’s global head of technology equity capital markets. Stewart predicts that 10 to 15 more tech companies could go public before the end of 2024, with a promising outlook for 2025. Recent IPOs have been successful, with high prices and strong trading performances, indicating a positive trend for the future.
The slowdown in the IPO market began in 2022 due to factors such as inflation and rising interest rates, which led to a decrease in tech valuations and delayed plans for many tech companies to go public. However, September saw a turning point with the debuts of Instacart and Klaviyo, followed by Reddit and Astera Labs making waves in the market. Both stocks have performed well above their IPO prices, with Astera up approximately 145%, driven by investor interest in artificial intelligence.
Morgan Stanley played a key role in the successful IPOs of Reddit and Astera Labs, positioning itself for significant fees. Meanwhile, Goldman Sachs led the latest venture-backed tech IPO with Rubrik, a data management software developer, experiencing a 16% jump in its NYSE debut.
Stewart mentioned that it typically takes six months to bring an IPO to fruition, leading companies currently considering going public to likely postpone their plans until 2025 to avoid potential disruptions from the U.S. presidential election. Despite valuations retreating from their peak in 2021, the market is showing a renewed comfort in paying for growth, signaling a positive environment for companies looking to go public.
In my opinion, the resurgence in the IPO market is a positive sign for the tech industry and the overall economy. The success of recent IPOs indicates strong investor confidence and a willingness to support innovative companies. The upcoming wave of tech IPOs could bring new opportunities for growth and investment, driving further innovation in the market. Overall, the outlook for 2025 looks promising, with the potential for more tech companies to make their debut on the public market and contribute to the continued growth of the tech sector.