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.”
Amazon logo on a brick building exterior, San Francisco, California, August 20, 2024.
Smith Collection | Gado | Archive Photos | Getty Images
Amazon representatives met with the House China committee in recent months to discuss lawmaker concerns over the company’s partnership with TikTok, CNBC confirmed.
A spokesperson for the House Select Committee on the Chinese Communist Party confirmed the meeting, which centered on a shopping deal between Amazon and TikTok announced in August. The agreement allows users of TikTok, owned by China’s ByteDance, to link their account with Amazon and make purchases from the site without leaving TikTok.
“The Select Committee conveyed to Amazon that it is dangerous and unwise for Amazon to partner with TikTok given the grave national security threat the app poses,” the spokesperson said. The parties met in September, according to Bloomberg, which first reported the news.
Representatives from Amazon and TikTok did not immediately respond to CNBC’s request for comment.
TikTok’s future viability in the U.S. is uncertain. In April, President Joe Biden signed a law that requires ByteDance to sell TikTok by Jan. 19. If TikTok fails to cut ties with its parent company, app stores and internet hosting services would be prohibited from offering the app.
President-elect Donald Trump could rescue TikTok from a potential U.S. ban. He promised on the campaign trail that he would “save” TikTok, and said in a March interview with CNBC’s “Squawk Box” that “there’s a lot of good and there’s a lot of bad” with the app.
In his first administration, Trump had tried to implement a TikTok ban. He changed his stance around the time he met with billionaire Jeff Yass. The Republican megadonor’s trading firm, Susquehanna International Group, owns a 15% stake in ByteDance, while Yass has a 7% stake in the company, NBC and CNBC reported in March.
— CNBC’s Jonathan Vanian contributed to this report.
A worker delivers Amazon packages in San Francisco on Oct. 24, 2024.
David Paul Morris | Bloomberg | Getty Images
Amazon on Thursday announced Prime members can access new fixed pricing for treatment of conditions like erectile dysfunction and men’s hair loss, its latest effort to compete with other direct-to-consumer marketplaces such as Hims & Hers Health and Ro.
Shares of Hims & Hers fell as much as 17% on Thursday, on pace for its worst day.
Amazon said in a blog post that Prime members can see the cost of a telehealth visit and their desired treatment before they decide to proceed with care for five common issues. Patients can access treatment for anti-aging skin care starting at $10 a month; motion sickness for $2 per use; erectile dysfunction at $19 a month; eyelash growth at $43 a month, and men’s hair loss for $16 a month by using Amazon’s savings benefit Prime Rx at checkout.
Amazon acquired primary care provider One Medical for roughly $3.9 billion in July 2022, and Thursday’s announcement builds on its existing pay-per-visit telehealth offering. Video visits through the service cost $49, and messaging visits cost $29 where available. Users can get treatment for more than 30 common conditions, including sinus infection and pink eye.
Medications filled through Amazon Pharmacy are eligible for discounted pricing and will be delivered to patients’ doors in standard Amazon packaging. Prime members will pay for the consultation and medication, but there are no additional fees, the blog post said.
Amazon has been trying to break into the lucrative health-care sector for years. The company launched its own online pharmacy in 2020 following its acquisition of PillPack in 2018. Amazon introduced, and later shuttered, a telehealth service called Amazon Care, as well as a line of health and wellness devices.
The company has also discontinued a secretive effort to develop an at-home fertility tracker, CNBC reported Wednesday.
Former U.S. Army intelligence analyst Chelsea Manning says censorship is still “a dominant threat,” advocating for a more decentralized internet to help better protect individuals online.
Her comments come amid ongoing tension linked to online safety rules, with some tech executives recently seeking to push back over content moderation concerns.
Speaking to CNBC’s Karen Tso at the Web Summit tech conference in Lisbon, Portugal, on Wednesday, Manning said that one way to ensure online privacy could be “decentralized identification,” which gives individuals the ability to control their own data.
“Censorship is a dominant threat. I think that it is a question of who’s doing the censoring, and what the purpose is — and also censorship in the 21st century is more about whether or not you’re boosted through like an algorithm, and how the fine-tuning of that seems to work,” Manning said.
“I think that social media and the monopolies of social media have sort of gotten us used to the fact that certain things that drive engagement will be attractive,” she added.
“One of the ways that we can sort of countervail that is to go back to the more decentralized and distribute the internet of the early ’90s, but make that available to more people.”
Nym Technologies Chief Security Officer Chelsea Manning at a press conference held with Nym Technologies CEO Harry Halpin in the Media Village to present NymVPN during the second day of Web Summit on November 13, 2024 in Lisbon, Portugal.
Asked how tech companies could make money in such a scenario, Manning said there would have to be “a better social contract” put in place to determine how information is shared and accessed.
“One of the things about distributed or decentralized identification is that through encryption you’re able to sort of check the box yourself, instead of having to depend on the company to provide you with a check box or an accept here, you’re making that decision from a technical perspective,” Manning said.
‘No longer secrecy versus transparency’
Manning, who works as a security consultant at Nym Technologies, a company that specializes in online privacy and security, was convicted of espionage and other charges at a court-martial in 2013 for leaking a trove of secret military files to online media publisher WikiLeaks.
She was sentenced to 35 years in prison, but was later released in 2017, when former U.S. President Barack Obama commuted her sentence.
Asked to what extent the environment has changed for whistleblowers today, Manning said, “We’re at an interesting time because information is everywhere. We have more information than ever.”
She added, “Countries and governments no longer seem to invest the same amount of time and effort in hiding information and keeping secrets. What countries seem to be doing now is they seem to be spending more time and energy spreading misinformation and disinformation.”
Manning said the challenge for whistleblowers now is to sort through the information to understand what is verifiable and authentic.
“It’s no longer secrecy versus transparency,” she added.