Bank Morgan Stanley sees 10 to 15 more tech IPOs in 2024, and ‘an even better year’ in 2025

Bank Morgan Stanley sees 10 to 15 more tech IPOs in 2024, and ‘an even better year’ in 2025

After a long waiting period, “the IPO market is back.”

That’s according to Colin Stewart, Morgan Stanley
global technology equity capital markets leader. In an interview with CNBC’s “TechCheck” on Monday, Stewart said 10 to 15 more tech companies could go public before the end of 2024, with “an even better year” ahead for 2025.

“It’s been a long two-and-a-half years, where we’ve had nothing,” Stewart said. Recent initial public offerings have been highly priced and traded well, which “bodes well for the future,” he added.

The lethargy begins in 2022, when soaring inflation and rising interest rates drive investors away from risk, reducing technology valuations and causing many tech companies to delay their plans to go public. It is in contrast to the previous two years, which saw a record number of deals, including some at astronomical multiples.

The IPO market opened in September, with the first appearance of Instacart
and Claviyo
. But the first signs of real momentum came last month, as Reddit
becoming the first IPO for a major social media company since Pinterest
in 2019 and data center connectivity chip company Astera Labs
surged on its first day of trading.

Both stocks remain well above their IPO prices, with Astera up about 145% as investors pour money into all things tied to artificial intelligence.

Morgan Stanley was the lead banker on the Reddit and Astera IPOs, positioning itself to collect about $37 million in total fees.

Wall Street rival Goldman Sachs
led the latest venture-backed tech IPO last week. Rubric
, which develops data management software, jumped 16% in its New York Stock Exchange debut.

Stewart, who has been involved in some of the biggest deals over the past few decades, said it usually takes six months to take an IPO to the finish line. That means companies considering an IPO may hold off until 2025 to avoid intersecting with the US presidential election in November, he said.

As for valuations, Stewart said the market has retreated from its 2021 peak, and multiples in software and other technology sectors are now returning to levels seen in 2018 and 2019. Stewart described 2021 as an “amazing year” but also “tiring.”

“What’s happened in the last six to 12 months is that the market has become more comfortable with paying for regrowth,” Stewart said. “We’re not back to 2021 levels, but we’re getting a reasonable price for growth. And I think at that price, you start to see companies say, ‘You know, it’s actually not bad to be a public company.'”

However, the most valuable late-stage companies have yet to reach the exit. That list includes Elon Musk
SpaceX with Stripe and Databricks.

While Stewart said he would “love to take them public,” he acknowledged that the challenge for the bigger names is that “they have scale, they have growth, investors are giving them a lot of capital” and they are investing toward the future.

“Currently IPOs are not on their short-term horizon, unfortunately,” he said. “But when it comes they will be blockbusters.”