Reddit Spurs Optimism for IPO Market Revival, Options Trading Set to Launch Monday
The initial public offerings (IPOs) market, which has been in a state of hibernation, may have reached a turning point last week with the successful public offerings of tech favorites $Reddit(RDDT.US$ and $Astera Labs(ALAB.US$, alongside Switzerland-based skincare firm Galderma Group AG. Buoyed by a surge of investor enthusiasm, the share prices of these companies rose significantly, signaling a potentially invigorating resurgence for initial public offerings. In addition, Nasdaq's rapid listing of Reddit options on its exchange on Monday could potentially pave the way for further momentum in stock market debuts.
A spokesman of $Nasdaq(NDAQ.US$ claimed that it's expected to unveil options contracts for Reddit on March 25, the following Monday after Reddit's IPO, according to a Reuters report. The exchange anticipates offering Reddit options across its entire suite of six platforms, pending a green light from its listing qualifications department, the spokesperson noted.
The timeline for an exchange to begin offering options trading on a newly public stock isn't fixed and can vary widely, but it typically follows a waiting period after the stock's IPO. This waiting period allows for the establishment of a stable trading history and sufficient liquidity in the underlying stock. A revision in 2023 has shortened the post-IPO waiting period for options trading from four sessions to a mere two.
Reddit captivated Wall Street by fetching $748 million from share sales at the apex of its proposed range, with its stock experiencing a significant upswing as it commenced trading on the New York Stock Exchange. Just a day prior, Astera Labs, a company specializing in AI infrastructure, witnessed a stunning 72% leap in its stock value upon debuting on Nasdaq, securing $713 million in the process.
Rob Stowe, who leads US equity capital markets for Barclays, conveyed optimism to clients, suggesting these successful transactions reflect the market's vitality and breadth. "If the current dynamics persist, it's likely to tip the scales for those considering IPOs, prompting a wave of new deals this year," he stated.
The previous week also marked the most active period for IPOs in the US and Europe since September, with companies raking in $5.5 billion, Bloomberg data reveals. This flurry of activity adds to the hefty $9.1 billion already amassed through share sales by firms and their principal investors. As global indices reach unprecedented peaks, the IPO market in 2023 is benefiting from the upswing. Data shows that among entities that have secured upwards of $250 million on US or European bourses this year, the typical stock has seen a 27% return.
While the recent surge in IPO suggests a revival, industry experts anticipate a more measured pace of activity compared to the torrent witnessed during the last market upswing, which concluded in early 2022.
"There is fundamental demand from investors but only at the right price and for companies with good stories," said Achintya Mangla, JPMorgan's global ECM head. "To build a really good foundation for the IPO market, we still need to see this year's IPOs perform three, six months out."
A diverse array of companies is poised to test the IPO waters, including Lineage Logistics, aiming for a valuation north of $30 billion, and last year's $4 billion-valued Rubrik. While Waystar retracted its IPO filing, European markets anticipate debuts from luxury sneaker brand Golden Goose and fashion conglomerate Puig. On the horizon, larger US ventures like Databricks and Stripe, with substantial valuations of $43 billion and $50 billion respectively, entice investor curiosity primarily for their maturity and profitability prospects.
"To move forward with an IPO, management have to be confident in the economic backdrop and the expected performance of their business — that confidence is starting to improve ," said Eddie Molloy, co-head of Americas ECM for Morgan Stanley.
Source: FT.com, Reuters, Bloomberg
by moomoo news' Jimmy Wang
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