Mar 19, 2024 - Business

Reddit and Astera Labs look to end the tech IPO drought

Illustration of the wall street bull using a pole to clear up a log jam.

Illustration: Aïda Amer/Axios

The drowsy tech IPO market should get smelling salts this week, when both Reddit and Astera Labs go public.

Why it matters: Beyond giving bored bankers something to do, this will test investor appetite for new issues that are AI-adjacent.

Zoom in: Reddit has begun licensing user data to train large language models, and expects to eventually expand into similar deals for real-time, AI search.

  • Advertising remains the social media company's top revenue stream, but maybe not forever.
  • Astera develops chip-based connectivity products that enable AI compute cluster performance at scale. Its sales rose 45% last year, with losses cut by more than half, and argues that its total addressable market will exceed $27 billion within three years.

By the numbers: The two companies could raise more than $1.4 billion, combined, with each expected to be larger than any other tech IPO so far in 2024.

  • Reddit, which this morning disclosed a patent infringement claim from Nokia, plans to sell 22 million shares at $31-$34 per share, with a top fully diluted valuation of $6.4 billion.
  • Astera Labs yesterday increased its offering size to 19.8 million shares at $32-$34 per share, with a top fully diluted valuation of $5.7 billion.

The bottom line: Tech IPOs should be plentiful when the stock markets are bullish and VC-backed pipelines are full.

  • But that conventional wisdom has been defied for more than a year, including after last fall's brief run with Instacart and Klaviyo.
  • This may be the year's best shot at reviving the norm, as strong debuts could convince others to finally take the public plunge.
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