Good news, IPO edition

Welcome to Cautious Optimism, a newsletter on tech, business, and power.

• 📈 Trending Up: Wholesale inflation, in bummer news for interest rate doves … Google’s AI ambitions … Epic’s reach … tech taxes? … cybersecurity startups … Xiaohongshu … chip work in the United States, for now … state TV …

  • Google made lots of noise about the agentic capabilities of Gemini 2.0 — which, we noted recently, could run into a recently granted C3.AI patent.

• 📉 Trending Down: European interest rates … shame … Microsoft’s near-term EPS … Adobe’s stock, after earnings … ethics … ghosting founders … Microsoft shareholders’ view of bitcoin …

• Startup of the Day: Berlin-based Upvest, which just landed $105 million for its fintech service that allows other companies to offer their customers the ability to buy and sell shares. It’s not the only player in the space. I’ve covered Alpaca previously, for example. Treasury Prime is more banking as a service than trading, but it’s in the same milieu and will eventually compete with both Upvest and Alpaca when it inevitably adds equity trading to its product mix.

  • Not a bad round for European startups, a cohort that despite some high-profile successes is suffering from a lack of world-straddling success

Good News, IPO edition

Shares of Japanese crypto exchange Coincheck are up after it completed a SPAC transaction with Thunder Bridge IV, a blank-check company that raised $230 million back in 2021. Shares of the newly combined entity are up, but in a release, Coincheck admitted that it only wound up with “gross proceeds of approximately $31.6 million.”

Still, a flotation is a flotation, and Coincheck is worth nearly $14 per share, far above the traditional $10 per share SPAC value. Not bad. And a nice news item to help close out the year.

Coincheck is not alone in auguring positive for early 2025 IPO hopes. ServiceTitan first offered the market a $52 to $57 per share IPO price. (Our IPO notes here.) Then, the company raised that range to $65 to $67. It’s not rare to see IPO price ranges narrow as they scale, as the company in question has more data at that point to sharpen its projections.

Via Tyler Prahm

To price at $71 per share, then, is a notable above-raised-range IPO value for ServiceTitan. CNBC reports that the company is worth $6.3 billion at its IPO price; the company has yet to begin trading, but $71 is 36% more than $52. Despite the weird terms of ServiceTitan’s later private rounds, I’m calling the IPO a pretty clear win.

Bears will grouse that ServiceTitan was worth around $10 billion back in 2021. It’s a fair point. But I think that if you could get every theoretical decacorn worth a flat $10 billion during peak-ZIRP at just over a one-third discount, you’d have a lot of takers.

But wait, there’s more

While the number of tech IPOs of note in 2024 was modest, their results have been more than reasonable:

• Reddit

  • IPO Price: $34 per share

  • Current price, ∆: $171.71, +405%

• Astera Labs

  • IPO Price: $36 per share

  • Current price, ∆: $123.32, +243%

• Rubrik

  • IPO Price: $32 per share

  • Current price, ∆: $71.21, +123%

• Tempus AI

  • IPO Price: $37 per share

  • Current price, ∆: $44.97, +22%

• Pony.AI

  • IPO Price: $13 per share

  • Current price, ∆: $14.39, +11%

• WeRide

  • IPO Price: $15.50

  • Current price, ∆: $16.07, +4%

• iBotta

  • IPO Price: $88

  • Current price, ∆: $74.89, -15%

Apart from iBotta, that’s a damned impressive run of results. And looking at the figures, I wonder if Nvidia’s insane year shadowed Reddit’s own value appreciation more than was strictly warranted. Reddit, and Astera Labs, let’s be honest, crushed the game in public market terms this year.

That both companies are eating off the present AI boom is not a shock, but a reminder that smaller caps — in tech terms, at least — can offer notably impressive gains after listing. That’s precisely what you want to tell the market if you want to float more tech names.

I wonder if ServiceTitan would have managed such an impressive pre-IPO pricing run if prior 2024 tech listings hadn’t done so very well, iBotta to one side. For Klarna, Turo, Circle, and the other names we’ve been waiting on for what feels like 6,000 years, surely there aren’t many excuses left to avoid pulling the starter-gun trigger.

Europe

As China reaches for more stimulus and the United States waits for another rate cut, let’s turn our eyes briefly to our friends in Europe. As noted in Trending Down today, the EU central bank (ECB) cut rates. Here are its own words:

The Governing Council today decided to lower the three key ECB interest rates by 25 basis points. Accordingly, the interest rates on the deposit facility, the main refinancing operations and the marginal lending facility will be decreased to 3.00%, 3.15% and 3.40% respectively, with effect from 18 December 2024.

For reference, the target Federal Funds Rate is 4.50% to 4.75% today.

In good news, the ECB writes that “disinflation process is well on track,” with its staff economists projecting “headline inflation averaging 2.4% in 2024, 2.1% in 2025, 1.9% in 2026 and 2.1% in 2027.” That’s a pretty tame set of figures given recent history.

But slowing inflation might be more predicated on anemic growth than I expected. The ECB continues:

Staff now expect a slower economic recovery than in the September projections. Although growth picked up in the third quarter of this year, survey indicators suggest it has slowed in the current quarter. Staff see the economy growing by 0.7% in 2024, 1.1% in 2025, 1.4% in 2026 and 1.3% in 2027. The projected recovery rests mainly on rising real incomes – which should allow households to consume more – and firms increasing investment. Over time, the gradually fading effects of restrictive monetary policy should support a pick-up in domestic demand.

Low inflation numbers are welcome. GDP growth rates for the foreseeable future that would be better explained in bips instead of raw percentage terms are not. Here’s Goldman Sachs a few weeks back discussing 2025 expectations:

Worldwide GDP is forecast to expand 2.7% next year on an annual average basis, just above the consensus forecast of economists surveyed by Bloomberg and matching the estimated growth in 2024. US GDP is projected to increase 2.5% in 2025, well ahead of the consensus at 1.9%. The euro area economy is expected to expand 0.8%, compared to the consensus of 1.2%.

Goldman expects the United States to mostly match the global GDP growth rate, while it expects the euro area to lag even harder than most.

How to break European malaise won’t prove single factorial. And a war on its borders isn’t helping. But tough times can force hard, critical choices. Perhaps a more isolationist and self-indulgent United States’ government will force the European continent to reform how it approaches economic growth. Today, it’s not only poorer than the States but growing more slowly to boot. And that means that its American friends are not only pulling away, but the rest of the world is, too.