Reddit surges after NYSE debut
Shares of social media company Reddit soared nearly 50 percent on the New York Stock Exchange Thursday in a buoyant market debut that raised hopes about the IPO market.
The company, which trades under the ticker RDDT, finished at $50.44, up 48.4 percent from its initial public offering price, lifting the valuation to around $8 billion.
The hot trading debut came after the company’s IPO priced at the upper end of the range, raising a bit more than $500 million.
Market watchers were not sure what to expect from Thursday’s start given Reddit’s record of annual losses and skepticism about potential growth in advertising revenues -which the company has described as a key area of promise.
A few hours before the first trade, Chief Executive Steve Huffman told CNBC that Reddit was seeing “a lot of momentum” in the advertising market.
“What’s special about Reddit is whatever you’re into, whatever you’re going through,” whether applying to school or going through romantic or health trouble, “it’s all on Reddit,” he said. He added: “There’s really no constraint on how big the ads business can be.”
The social media company has also expressed confidence about growth from monetizing user data and greater international usage. Thursday’s trading performance suggested such arguments found resonance, at least initially, despite lingering questions about the company with a record of financial losses.
The entry of Reddit comes on the heels of a big slowdown in tech IPOs since the US Federal Reserve started hiking interest rates. With easy financing scarce, Silicon Valley has seen a dearth of businesses ready to make the leap to go public, with Pinterest being the last social media company to do so in 2019. San Francisco-based Reddit first filed for IPO in 2021 when the market was hot thanks to a Covid-linked growth boom for tech. But the attempt stalled as the internet economy cooled. Reddit - unlike Facebook or X, formerly Twitter - is siloed into about 100,000 subject-focused chatrooms known as subreddits, making it more specialized and a place where posts are less prone to going viral.
Even so, Reddit has 73 million average daily users and 267 million monthly users, mainly in the United States, according to its filing to US regulators.
Content in subreddits is mostly moderated independently, with the site demanding a basic standard that users must adhere to, making it less policed or centralized than Facebook or TikTok. Following the lead of companies like Airbnb and Rivian, Reddit set aside about eight percent of the IPO shares for moderators and top users, known as “Redditors.”
There are a lot of questions on whether Reddit will be a successful business and the company has never turned a profit in its two decades of existence.
Buoyed by faithful yet often unruly users, Reddit is not seen as fertile ground to grow advertising, which will be the main path for the company to make money.
Reddit was created in 2005 and was quickly sold to Conde Nast, the publisher of Vogue and the New Yorker magazine, in an unlikely pairing.
In 2011, Reddit was spun-off, though Conde Nast’s parent company, controlled by the Newhouse family, remains the biggest shareholder. OpenAI CEO Sam Altman is also a major investor after he led a fundraising round about a decade ago.
Reddit on Thursday told US stock regulators that it plans to go public on the New York Stock Exchange under the symbol “RDDT.” Reddit did not provide details regarding the number or price of shares nor when the initial public offering would occur. This will be the first stock market debut of an online social network since Pinterest went public in 2019.
Founded in 2005, the platform is home to more than 100,000 online communities devoted to a sweeping range of topics and was visited by an average of 76 million people daily in December, according to a filing with the Securities and Exchange Commission.
“They come to Reddit to participate in a vibrant community, a constantly evolving place where anyone, anywhere, can connect with like-minded people and dive into any topic,” co-founder and chief executive Steve Huffman said in the letter.