Big week for tech IPOs like Reddit boosts Morgan Stanley after lull

Wall Street’s tech IPO bankers may finally have a reason to break out the champagne this week, after a prolonged drought ended with a market debut. reddit and Astera Research Institute.

Although Reddit and Astera occupy very different parts of the technology market, they were the first notable venture-backed technology companies to go public in the United States. instacart and Claviyo During September. Prior to that, there had been no major deals since late 2021.

morgan stanley took the coveted top spot in both IPOs, making it a big winner among banks. goldman sachs Last year, Morgan Stanley led just two large venture-backed businesses, marking the end of a long dry spell for Morgan Stanley.The bank was on the left in the IPO. Hashi Corporation and samsara In December 2021.

According to , there have been only 15 total technology IPOs in the past two years. the study Provided by Jay Ritter, professor of finance at the University of Florida. This comes after a booming market in 2021, when 121 tech companies went public, the most since the dot-com bubble of 2000. Goldman Sachs and Morgan Stanley cut thousands of jobs last year, in part due to weak initial public offerings.

“The last few years have been relatively quiet in the capital markets,” said Eric Jurgens, a partner at law firm Debevoise & Plimpton who specializes in capital markets and private equity. He said investment banks are “certainly aggressive in marketing IPOs and other transactions to their clients and positioning companies to be able to participate in them when they are ultimately ready.” .

Some market experts see the past week’s movements as a sign of things to come. New York Stock Exchange President Lynn Martin told CNBC Thursday at the start of trading on Reddit that many companies are working toward delisting in the second quarter.

That would be welcome news for Morgan Stanley. The bank collected approximately $37 million in total fees as lead underwriter for the Astera and Reddit IPOs. That’s a drop in the bucket for the bank, which reported $12.9 billion in net revenue last quarter, primarily from wealth management. But this could be a sign of the end for the investment banking sector, whose revenue fell 46% in the two years from the fourth quarter of 2021 to the final three months of last year.

The 12 underwriters for Astera’s IPO collected $39.2 million in fees this week, with Morgan Stanley receiving about $12.9 million, a third of the total. The greenshoe option, which allows underwriters to purchase an additional 15% of the stock for their clients, would add $5.9 million to the fees paid.

Astera sells data center connectivity chips to cloud and artificial intelligence infrastructure companies. The stock soared 72% on its Nasdaq debut on Wednesday and continued its rally, benefiting from investors’ insatiable appetite for AI in general, rising another 13% over the next two days.

Reddit’s The long-awaited IPO took place on Wednesday night, and shares hit the public market on Thursday. Morgan Stanley earned $13 million in fees on the deal and was expected to earn up to $5.6 million in greenshoe option fees.