Reddit Posts 45% Gain in Week Since Its Trading Debut as US IPO Market Heats Up in Q1

Key Takeaways

• Despite a steep decline to close out the week, Reddit posted a 45% gain in the week since its trading debut as the market for initial public offerings (IPOs) in the U.S. heats up.
• IPO activity in the first quarter was up in many parts of the world compared to the same time last year, especially in the U.S., according to a report from EY.
• EY found 16 more companies went public in the U.S. in the first quarter of 2024 than in the same period last year, producing $5.8 billion more in proceeds.
• Two-thirds of private equity firms EY surveyed expect interest rate reductions later this year could help drive up the level of IPO activity in the rest of 2024.
• EY also suggested a wave of AI-related IPOs could develop in the years to come.

Despite a steep decline to close out the week, Reddit (RDDT) shares posted a 45% gain in the week since its debut as a public company, in what could point to a rising appetite for new tech stocks as the market for initial public offerings (IPOs) in the U.S. heats up.

IPO activity in the first quarter of this year was up in many parts of the world compared to the same time last year, especially in the U.S., according to a report from EY. In the U.S., there were 16 more IPOs generating about $5.8 billion more in proceeds in the first quarter of 2024 than in 2023.

Stock prices of companies that went public across a number of industries have also outpaced their IPO prices at a wider margin this year compared to last year, with EY noting growing confidence among issuers and investors amid optimism about the potential lowering of interest rates.

Two-thirds of private equity (PE) firms EY surveyed expect interest rate reductions later this year could help drive up the level of IPO activity in the rest of 2024.

EY also suggested a wave of IPOs for companies related to artificial intelligence (AI) could be on the horizon amid a surge in demand for AI. Astera Labs (ALAB), which makes chip-based connectivity products to boost the efficiency of AI, also started trading last week, with its stock price more than doubling in value since.

However, EY noted that with nearly 90% of the 277 AI-related companies it identified around the globe, 192 of which are in the U.S., that could be likely to IPO still in the seed or early venture capital rounds of funding, an AI IPO wave could take time to develop in the years to come.

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