Chip connectivity firm’s IPO fourth largest in US this year. Share sale elevates expectation for IPOs including Reddit’s.
Astera Labs Inc. jumped 72% in its trading debut after the semiconductor connectivity company’s initial public offering topped expectations to raise $713 million, adding momentum to AI-related stocks and a listings rebound.
The shares, which sold for $36 apiece in the IPO and rose as much as 76% on Wednesday, closed at $62.03, giving the Santa Clara, California-based company a market value of $9.46 billion. Including stock options and restricted share units, Astera has a fully diluted value of $10.4 billion.
The first-day gain was the biggest for a US IPO of $500 million or more since June 2021, when Kanzhun Ltd. shares increased almost 96% from their IPO price.
Astera and its investors priced the shares Tuesday above the target price of $32 to $34. The company, whose backers include Intel Corp. and Sutter Hill Ventures, had earlier elevated the marketed range and increased the size of the sale to 19.8 million shares.
The listing is the fourth largest in the US this year, according to data compiled by Bloomberg. It precedes the high-profile share sale later Wednesday by social-media company Reddit Inc., which is seeking as much as $748 million for it and its employees and shareholders.
Huge Opportunity
Astera co-founder and Chief Executive Officer Jitendra Mohan said in an interview that the company will use the funds from the IPO to hire 200 more engineers, and is considering M&A as a way to acquire whole engineering teams.
“We have a huge opportunity in front of us, and not enough people to do it,” Mohan said.
More than $7.9 billion has been raised via IPOs on US exchanges this year, including Astera’s share sale, according to data compiled by Bloomberg. That’s a 129% increase on the same period in 2023, the data show.
Mohan described the company’s role in the AI ecosystem as “building the connectivity products that are required to build AI in the cloud.” On whether Astera’s successful launch may open the window for other tech companies to do first-time share sales, he said “If you can go IPO, why wouldn’t you IPO?”
Astera’s offering was led by Morgan Stanley and JPMorgan Chase & Co., with participation from Barclays Plc, Deutsche Bank AG, Evercore Inc. and Jefferies Financial Group Inc., as well as six other firms acting as co-managers. Astera’s shares are trading on the Nasdaq Global Select Market under the symbol ALAB.
Founded in 2017, Astera develops semiconductor-based connectivity solutions with the aim of enabling the “mainstreaming” of AI and machine learning in the cloud, according to its website. Astera tapped into investor bullishness on AI as part of a 2022 funding round led by Fidelity Management & Research that raised $150 million at a $3.15 billion valuation.
Nvidia Corp. and other AI-related stocks have soared over the past year, helping to lift stock indexes to record highs.
Losses Cut
In 2023, Astera cut its net loss to $26 million on revenue of $116 million, compared with a loss of $58 million on revenue of $80 million the previous year, according to its filings.
The company’s investors include Intel’s venture arm. Sutter Hill Ventures is its biggest shareholder, controlling 12.6% of the company’s stock, according to its filings with the US Securities and Exchange Commission. Funds affiliated with Fidelity have a 6.4% stake.
Mohan owns 6.1% of the company’s shares, while co-founder and Chief Operating Officer Sanjay Gajendra has a 5% stake, the filings show.