TLDR:
- Astera Labs could be the company to help bust open the market for new issues
- Reddit and Astera will provide the year’s first real test of investor appetites for IPOs
Good morning! The most important IPO this week isn’t Reddit, the social media company that counts Sam Altman as an investor. Instead, Astera Labs could be the company to help bust open the market for new issues. Reddit and Astera will provide the year’s first real test of investor appetites for IPOs. In 2021, 397 companies went public using a traditional IPO, a record. But many of those IPOs performed badly in the aftermarket. About 82% are still trading below their IPO price. This week is important because Reddit and Astera are the first major tech IPOs of this year. Astera develops semiconductor-based connectivity solutions with the aim of enabling the “mainstreaming” of AI and machine learning in the cloud. Astera boosted the size and price of its IPO on Monday, raising $712.8 million after selling 19.8 million shares. Reddit is a social media company that lets its registered users submit posts, links, images, and videos that other members vote “up” or “down.” Reddit has raised more than $1.3 billion in funding and plans to go public soon. Both Reddit and Astera posted several quarters of losses and then swung to a profit in Q4. Reddit is going public at six times trailing sales, while Astera is more than 40 times. This discrepancy in valuation reflects the high value investors place on Astera’s expected growth.
