Astera Labs started as a publicly traded company and was up 46% at the time of the bell, trading at $52.56 per share. The company priced its IPO last night at $36 per share, above its raised price range. Astera’s debut marks the first material technology offering tracked by TechCrunch this year. Reddit, the well-known social forum and AI data provider, is expected to set the price after the close of trading today and launch its own public saga tomorrow.
Astera Labs makes connectivity hardware for cloud computing data centers. Astera has seen a recent surge in revenue because AI requires moving large amounts of data in, out, and around data centers. In 2022, he made $79.9 million, and then in 2023, his revenue increased by 45% to $115.8 million.
Shares closed the first day of trading at $62.03, an increase of 72%. The company’s strong early trading will surely spark criticism that it was mispriced and that the company left money on the table, but its bullish entry into public life is a sign that other private market tech companies It may help companies find the courage to list their shares after the deal. There was limited IPO activity for a long period of time.
Astera Labs’ IPO price valued it at about $5.5 billion, which would balloon to about $8.9 billion at current trading prices. The fully diluted valuation would be higher, but importantly for the company, it priced its IPO above the final private price and then surpassed the latter’s valuation shortly thereafter.
quiet winner
The song and dance surrounding Astera Labs’ initial public offering has been noticeably quieter than Reddit’s IPO, but there’s reason to believe this is more of a test of market demand for AI stocks than Reddit’s own debut. While Reddit’s AI-based data business certainly continues to grow within its operations, its share of 2023 forecasts remains in the single digits, according to TechCrunch’s analysis.
In contrast, building AI-driven data centers, which is benefiting Astera Labs, is likely to account for a large portion of the market’s current size and future growth. The fact that the company’s growth rate accelerated as much as it did in the fourth quarter of 2023, and that it was able to return from a loss to GAAP profitability in the same quarter, shows that it is a company that is moving forward thanks to the demand for AI. It supports my point of view. This is despite the fact that it is a far cry from the more headline-friendly underlying model work that OpenAI and its rivals are working on.
“They’re not an AI company, but I think they’re definitely benefiting from that trend,” said Renaissance Capital, a firm that tracks the IPO market and offers ETFs focused on public offerings. said Nick Einhorn, vice president of research. Einhorn added that Astera’s revenue growth in the most recent quarter is “their most compelling argument.”
Astera’s debut is also likely to be a better gauge of how venture-backed IPOs will perform this year. Reddit also has a somewhat unique financial past, including venture-backed acquisitions and spin-outs. Meanwhile, Astera Lab, founded in 2017, has raised $206 million in venture capital, with a final valuation of $3.1 billion, and is among the other companies people are paying attention to, including Databricks, Stripe, and Plaid. It has become a better company compared to other companies.
Next up is Reddit.
Astera stock’s final closing price could be a positive signal for the AI hardware company, but it could also add to the IPO momentum for Reddit’s own listing. If Astera had stumbled out of the gate, Reddit might have been injured before it even started trading.
Instead, Astera is publishing first-day trading results for the 2021 era. Perhaps Reddit can follow suit?
Astera’s strong performance in its first hours as a public company may also improve investor activity, which has curtailed or completely prevented some initial public offerings. As TechCrunch reported earlier this week, some late-stage startups are struggling with founders who are willing to enter the public markets, even at a lower price, due to high-stakes VC deal terms that include dilution. Even if there is, there is a possibility that the price will be lower than the last initial valuation and it will not be possible to list the company. Gives investors the right to block transactions.
If venture capitalists knew that this startup had the potential to hit the public market like Astera Labs, they would probably think differently about timelines.