IPO Market Heating Up for Tech

Your view on what this is, is a signal to the market this IPO from an air sports. Well, I mean, it is it is a data point for sure. You know, America, the brands that America Sports owns, you know, our venerable brands have been around for a while. The company showed good growth in both revenue and EBITDA, but it was laden with debt. It was a highly leveraged company. And, you know, the market has been punishing highly leveraged companies for a long time. Even though rates have come down, they're

still they're still, you know, still relatively high relative to where they were a few years ago. And so, you know, I think the market is still taking a wait and see approach. I think underwriters clearly misjudge demand. In fact, in this case. What was interesting is 60% of the IPO was bought by insiders. Normally, that's a really strong signal that should stimulate demand. So this this IPO is almost, you know, completely carried by inside investors or there was very shockingly little outside

interest. So this is a data point. It's a different type of company. I think when we see some more traditional companies that are, you know, maybe a little bit earlier, but but with real growth stories and unlevered, I think that'll be a better benchmark as to how the IPO market really is right now. Is it a starter gun for the five or so actual technology companies that are waiting in the wings as IPO candidates? Well, I wouldn't. It doesn't really feel like a big breath of wind when they're pri

ced, you know, 23 and a half percent below the midpoint of their filing range. We'll see how they trade today. I mean, you know what? Let's let's hold out a verdict until we see how it trades. But I wouldn't say it's it's it's a big starter gun. It doesn't mean the IPO market's going to close. And we had another sort of poorly performing IPO last week with Bright Spring that's traded down 15% in a week and also priced below its midpoint of its range. But both of those companies, as I said, were

highly levered. So I don't draw a lot of conclusions, frankly, from either of these two IPOs. I would like to see how, you know, I think it might be one of the next companies to come out. I would like to see how more traditional tech companies that are venture backed that, you know, don't have a long history and have significant leverage. I'd like to see how those companies price. So I don't think there's a ton to learn right now from either of these two IPOs. Let's therefore focus in on the rep

orting that was of this week that Reddit is looking at coming in the near future and trying to get a sense of what market capitalization, whether it's 5 billion also, which is a significant haircut from where they last raised money at. But you've been highlighting some of the names that might well come to the market as well as Reddit. You've got Stripe Turow, Chime Databricks Service Titan. Are we likely to see some pain for previous rounds of late stage investors and what recompense do they get

? It's a really interesting question. You know, Reddit's last round valuation was 10 billion, you know, in sort of the height of the market in 2021. You know, I think that given they're reasonably well, they filed for IPO at the end of 21, they said they were going to do a billion of revenue in 2023. They did sound sounds like by record somewhere closer to 800 million. So they are growing, growing reasonably well. But, you know, I think that would suggest a valuation, you know, in an IPO in the,

you know, 4 to 6 billion range. So how do last round investors who paid 10 billion feel about that? It'll be an interesting discussion between last round investors and current investors and potentially, you know, IPO investors. But this is a problem that a lot of companies are are face. And we saw, you know Instacart when they went public they had a $39 billion you know last round valuation. Then they went public at around 10 billion. So this is the medicine that I think companies are going to

have to take to get to the IPO markets. But we're going to see a lot of interesting negotiations between last round investors and underwriters at this point. And the reason, Greg, we have your expertise on the show is because you are there helping make markets in pre IPO names. And I'm interested as to what appetite is like at the moment, what sort of valuations you're tending to see in these transactions. Yeah, I mean we've we've definitely seen a significant drop off of valuations over the las

t couple of years. You know, with with a couple of exceptions. Clearly, the air space has been a rocket ship, as has the rocket company Space X, you know, So there's been a couple of exceptions, but generally speaking, we've seen significant devaluation in a lot of these high flying companies. You know, we've recently seen trading, you know, start to pick up a little bit as investors feel that an IPO is forthcoming. But we're seeing pricing and, you know, just below 5 billion rand. But as a gene

ral rule, you know, we're starting to see a little bit of an uptick in both demand and in valuations. And I think that bodes well for, you know, a healthy IPO market should, you know, most of the other economic indicators sort of stay stable as as well as they are now.