The New York Stock Exchange welcomes Reddit, Inc. (NYSE: RDDT) to celebrate its initial public offering. To honor the occasion, Snoo, rings the Opening Bell®.
NYSE
Wall Street’s tech IPO bankers may finally have a reason to break out the champagne after an extended drought was broken up this week with the market debuts of Reddit and Astera Labs.
While occupying very different corners of the technology market, Reddit and Astera were the first notable venture-backed tech companies to go public in the U.S. since Instacart and Klaviyo in September. Before that, there hadn’t been a significant deal since late 2021.
Morgan Stanley was the big winner among banks, having captured the coveted lead left spot on both IPOs. Goldman Sachs led last year’s only two big venture-backed offerings, meaning it had been a long dry spell for Morgan Stanley. The bank was lead left on IPOs for HashiCorp and Samsara in December 2021.
In the past two years, there have only been 15 tech IPOs total, according to research provided by University of Florida finance professor Jay Ritter. That came after a booming market in 2021, when 121 tech companies went public, the most since the dot-com bubble in 2000. Goldman Sachs and Morgan Stanley cut thousands of jobs last year in part due to the downturn in initial public offerings.
“The capital markets have been relatively quiet the past couple of years,” said Eric Juergens, a partner at law firm Debevoise and Plimpton who focuses on capital markets and private equity. Investment banks have “certainly been active in pitching clients on IPOs and other transactions and positioning themselves to be there when companies are finally ready,” he said.
Some market experts see the past week’s action as a sign of what’s to come. New York Stock Exchange President Lynn Martin told CNBC on Thursday, at the opening of Reddit trading, that a lot of companies are working toward going out in the second quarter.
That would be welcome news for Morgan Stanley. The bank collected around $37 million in total fees as the lead underwriter for the Astera and Reddit IPOs. It’s a drop in the bucket for the bank, which reported $12.9 billion in net revenue last quarter, largely from wealth management. But it could be a sign of life in the investment banking unit, which saw revenue drop by 46% over a two-year stretch from the fourth quarter of 2021 to the final three months of last year.
The 12 underwriters on Astera’s IPO this week collected $39.2 million in fees, with Morgan Stanley taking one-third of the total, or around $12.9 million. The overallotment, or greenshoe option, which allows underwriters to purchase an additional 15% of shares for clients, would add $5.9 million to the fees paid out.
Astera sells data center connectivity chips to cloud and artificial intelligence infrastructure companies. The stock soared 72% in its Nasdaq debut on Wednesday and continued rallying, gaining another 13% over the next two days, benefiting from investors’ seemingly insatiable appetite for all things AI.
‘Everyone was watching’
Reddit’s long-awaited IPO came Wednesday night, with shares hitting the open market Thursday. Morgan Stanley made $13 million in fees in the deal and stood to make up to $5.6 million from fees on the greenshoe option.
Shares of the 19-year-old social media company popped 48% in their first day of trading on the NYSE, before dropping 8.8% on Friday.
Lise Buyer, founder of IPO consultancy Class V Group, said the market is showing signs of thawing.
“A warm reception in the market for these IPOs surely will help open the floodgates,” Buyer said. “Everyone was watching these. Investors, boards of directors and management were encouraged by them.”
She added that the bankers who have been waiting for action, “have to be delighted by this.”
Goldman Sachs, Morgan Stanley’s biggest rival, had the No. 2 position on the Reddit IPO, capturing about 19% of the fee payout. The firm scored wins last year as the lead on the Instacart and Klaviyo IPOs, which brought in combined fee revenue of around $35 million. When SoftBank took semiconductor design company Arm Holdings public last year, Barclays led the deal, with participation from Goldman Sachs, and JP Morgan.
Arm Holdings CEO Rene Haas poses for a photo with members of leadership outside of the Nasdaq MarketSite on September 14, 2023 in New York City.
Michael M. Santiago | Getty Images
For Investment banks, the IPO is often viewed as just the beginning of the relationship with a company. The future could bring follow-on offerings, debt raises and acquisitions, which are all specialties of the top Wall Street firms.
Morgan Stanley is finding another way to bring in additional potential business. In both the Reddit and Astera IPOs, a portion of the equity was set aside for so-called directed-share programs (DSPs), giving high-valued customers, business partners or company insiders a chance to participate.
The model was previously employed by Airbnb, Rivian and Doximity, bringing power users or early customers into their IPOs. For Morgan Stanley, the DSPs have the potential to lure new individual customers into the bank for wealth management and other services.
In Reddit’s case, the company said tens of thousands of Redditors participated in its DSP.
“The goal is just to get them in the deal,” Reddit CEO Steve Huffman told CNBC in an interview on Thursday. “Just like any professional investor.”
Altimeter Capital CEO Brad Gerstner said Thursday that he’s moving out of the “bomb shelter” with Nvidia and into a position of safety, expecting that the chipmaker is positioned to withstand President Donald Trump’s widespread tariffs.
“The growth and the demand for GPUs is off the charts,” he told CNBC’s “Fast Money Halftime Report,” referring to Nvidia’s graphics processing units that are powering the artificial intelligence boom. He said investors just need to listen to commentary from OpenAI, Google and Elon Musk.
President Trump announced an expansive and aggressive “reciprocal tariff” policy in a ceremony at the White House on Wednesday. The plan established a 10% baseline tariff, though many countries like China, Vietnam and Taiwan are subject to steeper rates. The announcement sent stocks tumbling on Thursday, with the tech-heavy Nasdaq down more than 5%, headed for its worst day since 2022.
The big reason Nvidia may be better positioned to withstand Trump’s tariff hikes is because semiconductors are on the list of exceptions, which Gerstner called a “wise exception” due to the importance of AI.
Nvidia’s business has exploded since the release of OpenAI’s ChatGPT in 2022, and annual revenue has more than doubled in each of the past two fiscal years. After a massive rally, Nvidia’s stock price has dropped by more than 20% this year and was down almost 7% on Thursday.
Gerstner is concerned about the potential of a recession due to the tariffs, but is relatively bullish on Nvidia, and said the “negative impact from tariffs will be much less than in other areas.”
He said it’s key for the U.S. to stay competitive in AI. And while the company’s chips are designed domestically, they’re manufactured in Taiwan “because they can’t be fabricated in the U.S.” Higher tariffs would punish companies like Meta and Microsoft, he said.
“We’re in a global race in AI,” Gerstner said. “We can’t hamper our ability to win that race.”
YouTube on Thursday announced new video creation tools for Shorts, its short-form video feed that competes against TikTok.
The features come at a time when TikTok, which is owned by Chinese company ByteDance, is at risk of an effective ban in the U.S. if it’s not sold to an American owner by April 5.
Among the new tools is an updated video editor that allows creators to make precise adjustments and edits, a feature that automatically syncs video cuts to the beat of a song and AI stickers.
The creator tools will become available later this spring, said YouTube, which is owned by Google.
Along with the new features, YouTube last week said it was changing the way view counts are tabulated on Shorts. Under the new guidelines, Shorts views will count the number of times the video is played or replayed with no minimum watch time requirement.
Previously, views were only counted if a video was played for a certain number of seconds. This new tabulation method is similar to how views are counted on TikTok and Meta’s Reels, and will likely inflate view counts.
“We got this feedback from creators that this is what they wanted. It’s a way for them to better understand when their Shorts have been seen,” YouTube Chief Product Officer Johanna Voolich said in a YouTube video. “It’s useful for creators who post across multiple platforms.”
CEO of Meta and Facebook Mark Zuckerberg, Lauren Sanchez, Amazon founder Jeff Bezos, Google CEO Sundar Pichai, and Tesla and SpaceX CEO Elon Musk attend the inauguration ceremony before Donald Trump is sworn in as the 47th U.S. president in the U.S. Capitol Rotunda in Washington, Jan. 20, 2025.
Saul Loeb | Via Reuters
Technology stocks plummeted Thursday after President Donald Trump’s new tariff policies sparked widespread market panic.
Apple led the declines among the so-called “Magnificent Seven” group, dropping nearly 9%. The iPhone maker makes its devices in China and other Asian countries. The stock is on pace for its steepest drop since 2020.
Other megacaps also felt the pressure. Meta Platforms and Amazon fell more than 7% each, while Nvidia and Tesla slumped more than 5%. Nvidia builds its new chips in Taiwan and relies on Mexico for assembling its artificial intelligence systems. Microsoft and Alphabet both fell about 2%.
The drop in technology stocks came amid a broader market selloff spurred by fears of a global trade war after Trump unveiled a blanket 10% tariff on all imported goods and a range of higher duties targeting specific countries after the bell Wednesday. He said the new tariffs would be a “declaration of economic independence” for the U.S.
Companies and countries worldwide have already begun responding to the wide-sweeping policy, which included a 34% tariff on China stacked on a previous 20% tax, a 46% duty on Vietnam and a 20% levy on imports from the European Union.
China’s Ministry of Commerce urged the U.S. to “immediately cancel” the unilateral tariff measures and said it would take “resolute counter-measures.”
The tariffs come on the heels of a rough quarter for the tech-heavy Nasdaq and the worst period for the index since 2022. Stocks across the board have come under pressure over concerns of a weakening U.S. economy. The Nasdaq Composite dropped nearly 5% on Thursday, bringing its year-to-date loss to 13%.
Trump applauded some megacap technology companies for investing money into the U.S. during his speech, calling attention to Apple’s plan to spend $500 billion over the next four years.