Stocks of Recent Tech IPOs Surge at Pace Not Seen Since 2021

PitchBook’s VC-Backed IPO Index is up 68% through Dec. 27 and at its highest level in three years.

30 December, 2024 | 8:48PM
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In this photo illustration, the Reddit logo is displayed on a smartphone screen and in the background.

This story was originally published on PitchBook.

The US tech IPO market is blocked up by startups that are scared to go public. But if stocks are anything to go by, they have little to fear. PitchBook’s VC-Backed IPO Index rose 68% through Dec. 27 and is at its highest level in three years.

A good chunk of that growth has been driven by recently IPO’d companies. Reddit’s RDDT stock price is up 240% during the period, while Rubrik RBRK and Astera Labs ALAB have risen more than 100%. Investor bullishness on artificial intelligence and increased confidence driven by falling interest rates have accelerated tech stock growth.

Reddit in particular has had a stellar few months. In its third-quarter earnings, the firm achieved GAAP profitability for the first time as a public company and reported 68% year-over-year revenue growth to $348 million.

Strong performance in public equities has the potential to open the floodgates for more tech IPOs. Many late-stage founders have been waiting in the wings for the last two years for valuations to hit the high-water mark they set back in 2021. Founders have been reticent to go public below their last valuations and swallow the resultant dilution.

Some, like recently listed software company ServiceTitan TTAN, had no choice but to go public below their last price because of the terms of their last private financing round. But even in ServiceTitan’s case—not yet profitable and debuting at a down round—the public markets were immediately sold. Its stock popped 42% in its IPO debut.

More IPOs will be welcome news for general partners after a record-long IPO drought that left many limited partners starved for liquidity. The strong performance in public equities could also prompt institutions to offload their holdings if they anticipate a dip in 2025.

Earlier this year, CalPERS boosted its private equity target from 13% to 17% and private credit from 5% to 8%, the equivalent of a $34 billion boost.

Despite the bullish moves in tech, some companies will still be sitting on their hands for a while. DataBricks, Revolut, and SpaceX have all reportedly held tender offers in the last quarter—an indicator that they intend to remain private.

By Rosie Bradbury


The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.

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