Reddit’s social media platform (RDDT.N) Shares ended their first day of trading in New York up 48%, signaling that investor appetite for IPOs of promising but loss-making companies could be returning.
Reddit stock closed 48% above the initial offering price when the company opened Thursday, valuing the social media platform at more than $9 billion in a closely watched opening. The stock peaked at $57.80 per share, up 70%, before falling to $50.44 to close the day.
The San Francisco-based company’s IPO was initially valued at $34 per share, bringing its market value to $6.4 billion. The company and its selling shareholders raised $748 million.
The long-awaited IPO was more than two years in the making. Reddit confidentially filed for an IPO in December 2021, but ended up delaying due to stock market turmoil. Its current valuation represents a drop from 2021, when it was valued at $10 billion in a private funding round.
Reddit’s robust entry into the market is expected to generate 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 expected to raise up to $1.4 billion from its debut. Advance acquired Reddit for $10 million just 18 months after its launch.
Reddit co-founder and CEO Steve Huffman received compensation worth $193 million last year. The site’s other co-founder, Alexis Ohanian, long the public face of the company after Huffman’s technical role, does not appear in the company’s filings with U.S. financial regulators.
Other major Reddit shareholders include Chinese gaming giant Tencent, which owns 11% of the company after leading a $300 million investment round in 2019; Fidelity, which owns 9.5% of several investments in the company; and OpenAI CEO Sam Altman, who owns 8.7% after investing in 2014. Reddit participated in the first class of the influential startup accelerator program Y Combinator shortly after its founding in 2005. Altman later served as president of Y Combinator.
With few high-profile tech IPOs in recent years, the frenzy for tech stocks is likely to help Reddit get a strong start in the market, experts say. But investors will be watching the market closely in the coming weeks, said Julian Klymochko, CEO of alternative investment solutions company Accelerate Financial Technologies.
“If Reddit trades poorly, it will cast a shadow over the IPO market,” Klymochko said. “Many companies will pause their IPO initiatives.”
After its launch in 2005, Reddit became one of the cornerstones of social media culture. Its logo – representing an alien head on an orange background – is one of the most recognized symbols on the Internet. The company has long used the slogan “The Front Page of the Internet.”
Its 100,000 online forums, called “subreddits,” allow for conversations on topics ranging from “the sublime to the ridiculous, the trivial to the existential, the comical to the serious,” according to Huffman.
Huffman himself turned to one of the subreddits for help in quitting drinking, he wrote in his letter. Barack Obama, the former US president, also conducted an “AMA” (“ask me anything”), Internet jargon for an interview, with users of the site in 2012.
But despite its cult status in the social media world, the company has failed to replicate the success of its biggest rivals, including Meta’s Facebook and Elon Musk’s X. It has about 73 million daily unique visitors, according to its documents. Facebook, on the other hand, claims that 2 billion people log into its app every day.
As part of its plan to reward its user base, Reddit has reserved 8% of the shares offered to eligible users and moderators, certain board members, and friends and family members of its users. employees and directors.
The company said it was “in the early stages of monetizing (its) business” and had yet to turn an annual profit. Analysts said investors would scrutinize its roadmap to profitability.
“The real news will be after the first conference call on the results: where are they going, what do the results look like, what changes will they bring,” said Reena Aggarwal, director of the Psaros Center for Financial Markets and Capital Markets from Georgetown University. Policy.