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Investors show hunger for U.S. IPOs

Mar 25, 2024
Data: LSEG; Chart: Axios Visuals
Data: LSEG; Chart: Axios Visuals

The IPOs that hit the U.S. market last week received a broad base of investor support.

Why it matters: Reddit priced at the top of its range and then popped nearly 50% on its first day of trading. AI company Astera Labs priced its deal at the top and soared more than 70% on its opening day.

  • Bankers who spoke with Axios say that the performances of both deals bode well for future IPOs in the market after several years of scant offerings and mediocre performances for those that braved the market.
  • Global IPOs have also hit their stride this year, with several deals showing strength.

Zoom in: As of Friday last week, IPOs raised $7.1 billion on U.S. stock exchanges year to date, more than triple the amount raised in the same year-ago period, according to LSEG.

  • It's also more than triple the amount raised during the same 2022 stretch.
  • Reddit's IPO raised $748 million, becoming the third-largest U.S. IPO this year, following outdoor brand Amer Sports, which tops the list at $1.4 billion, and American Healthcare, a REIT that raised $773 million.

Between the lines: Key to the success so far this year is a broad-based support from key investors, namely the long only regulars who drive key demand for offerings: Fidelity, T. Rowe Price, Capital Group and other institutional investors in that camp.

  • In addition, smaller growth fund investors are buying into the deals, along with retail investors, forming a critical base of support that leads to both high demand for buying into the deal and strong after-market trading.

Reality check: It's early days for these offerings, and investors will watch how they perform over the long term.

  • Last September, software company Klayvio traded up 9% on its first day but fell below its $30 IPO price within a few weeks, and is currently trading around $26.
  • Still, bankers say the breadth of investor appetite for the deals signals that, at least for the next few quarters, stability should anchor the stock price and help avoid any major swings.

What we're watching: Alta Global Group (fitness tech company), Boundless Bio (cancer biotech) and Mobile-health Network Solutions (telehealth) all plan to list in the U.S. this week.

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