Social media platform Reddit (RDDT.N) Stocks closed the first day of trading up 48% in New York, suggesting that investor appetite for promising but money-losing companies’ initial public offerings (IPOs) may be returning.
Reddit shares closed 48% above their initial offer price in the company’s trading debut on Thursday, valuing the social media platform at more than $9 billion in the high-profile opening. The stock rose 70% to peak at $57.80 per share, before falling to $50.44 per share to end the day.
The San Francisco-based company’s initial public offering price was $34 per share, giving it a market value of $6.4 billion. The company and its selling shareholders raised $748 million.
The long-awaited IPO has been in the works for more than two years. Reddit secretly filed for an IPO in December 2021, but it was ultimately postponed due to stock market turmoil. The current valuation represents a drop from 2021, when it was valued at $10 billion in a private funding round.
Reddit’s aggressive entry into the market could be a windfall for its largest shareholder, Advance Publications. Condé Nast’s parent company, which owns popular magazines such as The New Yorker, Vogue and Wired, is set to profit as much as $1.4 billion from the debut. Advance acquired Reddit for $10 million just 18 months after its launch.
Reddit co-founder and CEO Steve Huffman received a compensation package worth $193 million last year. The site’s other co-founder, Alexis Ohanian, has long been the public face of the company in a technical role behind Huffman, but he does not appear in the company’s filings with U.S. financial regulators. It has not appeared.
Reddit’s other major shareholders include Chinese gaming giant Tencent, which led a $300 million investment round in 2019 and owns 11% of the company. Fidelity owns 9.5% from multiple investments in the company. OpenAI CEO Sam Altman invested in 2014 and owns 8.7%. Shortly after its founding in 2005, Reddit was part of the first batch of the influential Y Combinator startup accelerator program. Mr. Altman later served as president of Y Combinator.
Experts say the tech frenzy is likely to help Reddit get a head start in the market, as there have been few large tech IPOs in recent years. But Julian Klimochko, CEO of alternative investment solutions firm Accelerate Financial Technologies, said investors will be watching the market closely in the coming weeks.
“If Reddit trades poorly, it will cast a shadow on the IPO market,” Klimochko said. “Many companies will likely pause their IPO efforts.”
Since its founding in 2005, Reddit has become one of the cornerstones of social media culture. Its logo, featuring an alien head on an orange background, is one of his most well-known symbols on the internet. The company has long used the tagline “Front Page of the Internet.”
Huffman said 100,000 online forums, called “subreddits,” allow for conversations about topics ranging from “the sublime to the ridiculous, the trivial to the existential, the humorous to the serious.” can do.
Huffman himself wrote in a letter that he sought help from one of the subreddits to quit drinking. Former U.S. President Barack Obama also conducted an interview with users of the site in 2012, known as an “AMA” (“Ask Me Anything”) in internet parlance.
But despite its cult status in the social media world, the company has not been able to replicate the success of larger rivals like Mehta’s Facebook and Elon Musk’s X. The company boasts about 73 million unique visitors a day, according to its filings. By contrast, Facebook says 2 billion people log into its apps every day.
As part of its plan to reward its user base, Reddit reserved 8% of the offering’s shares for eligible users and moderators, certain board members, and friends and family of employees and directors.
The company said it is “in the early stages of monetization.” [its] business” and has not yet made an annual profit. Analysts said investors will scrutinize the company’s roadmap to profitability.
“The real news will come after the first earnings report. Where will companies go, what will the results be and what changes will they make,” said Leena Agarwal, director of Georgetown University’s Psaros Center for Financial Markets. . policy.
