Last week we wrote about how merger and acquisition activity has been light so far for 2024, well the same holds for initial public offering activity. However, this week brings two highly anticipated public debuts that could reignite hopes for an upswing in IPOs.
Astera Labs and Reddit going public
Astera Labs, a semiconductor company that builds connectivity solutions to help with AI and Machine Learning workloads, is set to IPO on Wednesday, March 20. The Intel-backed (INTC, Financial) company will make its public debut by offering 17.8 million shares in a share price range of $27 to $30, putting their IPO raise at as much as $534 million, with a valuation of $5 billion. This will mark the first big semiconductor debut since ARM Holdings (ARM, Financial) back in September. Speaking of ARM, their IPO lockup period ended on Tuesday, March 13 and was met with increased trading activity, but ultimately share prices have remained flat since then.
Reddit will make its long-awaited public debut on Thursday, March 21. The debut offering will feature 22 million shares in a price range of $31 to $34, making for a total raise amount of $715 million on the high end and a valuation of close to $6.5 billion.
IPO activity light year to date
Despite these two high-profile debuts, the year to date has otherwise been light for IPOs, which are still facing headwinds from higher interest rates, making private companies hesitant to come to market. In January and February, there were only 34 IPOs vs. a five-year average of 93. So far in March, only NeOnc Technologies Holdings has filed for an IPO.
Source: Wall Street Horizon
Looking ahead
How Astera Labs and Reddit perform this week and in the weeks following their public entrance will likely impact how confident other private companies are in IPOing in 2024. Last year's IPO glut was, in part, due to the worse-than-expected performance of many newly public companies.[1] Poor business conditions caused companies such as Reddit to delay their plans to go public. With interest rates expected to fall later this year and the continued path to a soft landing,[2] this could be just the recipe needed for a resurgence in IPO activity.
1 EY Global IPO Trends 2023, December 13, 2023 https://assets.ey.com
2 Semiannual Monetary Policy Report to the Congress, Chair Jerome Powell, March 6, 2024, https://www.federalreserve.gov
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