Reddit to the Moon Won’t Launch an IPO Boom

Two knockout stock-market debuts by tech companies last week will boost confidence among others waiting for their chance to go public – and lift the hopes of investors in venture capital funds who’ve endured meager returns in the past couple of years.

But Reddit Inc. and Astera Labs Inc. don’t herald a blizzard of initial public offerings in 2024.

Beyond the still-uncertain economy and a US presidential election, West Coast tech bankers and venture fund managers also recognize that markets have a long path to recover from the excesses of the cheap-money bubble that peaked in 2021 – and that stock-market investors remain sober and clinical in appraising new companies.

Reddit and Astera Labs both did much better than expected in pricing and early trading, but for reasons that illustrate the limits of what public investors will buy. Mostly, they’re no longer interested in growth without profitability – or at least the promise of profits very soon, according to bankers.

Reddit is an unusual success: It’s a relatively mature, but lossmaking business that has yet to prove its rowdy and rebellious user base will sustainably draw advertisers. It attracted buyers mostly by being cheap. The IPO valued Reddit at $5.4 billion, down heavily from the $10 billion mark in its last private fund-raising round in 2021.