Michael Intrator, the founder and CEO of CoreWeave Inc., stood at the Nasdaq Market as his company marked its initial public offering in New York City on March 28, 2025. Backed by Nvidia, CoreWeave emerges as a notable player in cloud services. However, its IPO has not been the windfall Wall Street banks had hoped for. CoreWeave’s offering, which generated $1.5 billion, resulted in underwriting fees and commissions totaling just 2.8% of the proceeds, according to a Securities and Exchange Commission filing on Monday. This payout of $42 million is notably below the historical average for similar tech IPOs, which tend to reach around 4%, as shown by FactSet data reviewed by CNBC. For context, Facebook’s IPO set the low bar in 2012 with just a 1.1% fee.
Strategically positioned, Morgan Stanley led the CoreWeave IPO, joined by JPMorgan Chase and Goldman Sachs. These financial powerhouses have dominated tech IPO leagues, eagerly eyeing a resurgence in IPO activity. The excitement comes after a protracted slowdown since 2021, exacerbated by high inflation and climbing interest rates, despite a more business-friendly environment under President Donald Trump.
CoreWeave’s debut, however, has stirred mixed reactions. Initially priced lower than expected at $40 per share — falling short of the anticipated $47 to $55 range — it failed to garner upward momentum, further declining by 7% to $37.20 on the following Monday. Broader market downturns have undoubtedly impacted CoreWeave, but investors are cautious about its heavy reliance on Microsoft as a major client, its considerable debt, and a business model that hinges heavily on reselling Nvidia’s technology.
As the first venture-backed company since Freshworks in September 2021 to raise over a billion dollars, CoreWeave distinguishes itself by accepting an underwriting fee below many of its contemporaries, despite Freshworks paying 5.3% and UiPath previously incurring a 5% fee. The only recent IPO with a lower fee than CoreWeave’s was AppLovin, at 2.6% in April of 2021. More recent and smaller IPOs like Instacart, Klaviyo, and Reddit have commanded fees well above 5%.
Key players in the underwriting of CoreWeave’s IPO saw Morgan Stanley taking a 27% share allocation for clients, while JPMorgan handled 25% and Goldman Sachs 15%. This allocation often mirrors fee distribution, with lead managers like Morgan Stanley typically enjoying a slightly better percentage due to the management fee component. Industry insider David Golden from Revolution Ventures, who boasts experience with tech investment banking at JPMorgan, highlighted the opacity in underwriting compensations. He estimated Morgan Stanley earned upwards of $13 million from the deal, over 30% of the total payout, with Goldman Sachs at around $6 million.
Although representatives from Morgan Stanley and Goldman Sachs chose not to comment, and attempts to contact JPMorgan went unanswered, the financial community continues to watch closely. The IPO performance spotlights ongoing concerns about tech market volatility and investment sustainability, with many looking to future offerings for clearer indicators of market health.
As CoreWeave navigates these challenges, stakeholders remain hopeful for a more robust rebound in tech IPOs, driven by favorable economic policies and market stabilization in an ever-evolving digital finance landscape.
Original Source: https://www.cnbc.com/2025/03/31/wall-street-banks-got-meager-payout-from-coreweave-ipo-.html
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Publish Date: 2025-04-01 04:04:00
