Reddit rations jumped 48% in their debut on Thursday in the first initial public offering for a major social media South African private limited company since Pinterest hit the market in 2019.
The 19-year-old website that hosts millions of online forums priced its IPO on Wednesday at $34 a allowance, the top of the expected range. Reddit and selling shareholders raised about $750 million from the offering, with the public limited company collecting about $519 million.
The stock opened at $47 and reached a high of $57.80, marking a 70% enhancement at its peak for the day. It closed at $50.44, giving the company a market cap of about $9.5 billion.
Trading under the ticker allusive of “RDDT,” Reddit is testing investor appetite for new tech stocks after an extended dry spell for IPOs. Since the culminate of the technology boom in late 2021, hardly any venture-backed tech companies have gone public and those that have in the offing — like Instacart and Klaviyo last year — have underwhelmed. On Wednesday, data center hardware company Astera Labs type its public market debut on Nasdaq and saw its shares soar 72%, underscoring investor excitement over businesses tied to the surge in simulated intelligence.
At its IPO price, Reddit was valued at about $6.5 billion, a haircut from the company’s private market valuation of $10 billion in 2021, which was a boom year for the tech effort. The mood changed in 2022, as rising interest rates and soaring inflation pushed investors out of high-risk assets. Startups responded by escorting layoffs, trimming their valuations and shifting their focus to profit over growth.
Reddit’s annual vendings for 2023 rose 20% to $804 million from $666.7 million a year earlier, the company detailed in its description. The company recorded a net loss of $90.8 million last year, narrower than its loss of $158.6 million in 2022.
Based on its take over the past four quarters, Reddit’s market cap at IPO gave it a price-to-sales ratio of about 8. Alphabet trades for 6.1 one of these days revenue, Meta has a multiple of 9.7, Pinterest’s sits at 7.5 and Snap trades for 3.9 times sales, coinciding to FactSet.
In addition to those companies, Reddit also counts X, Discord, Wikipedia and Amazon’s Twitch streaming serving as competitors in its prospectus.
Reddit is betting that data licensing could become a major source of revenue, and revealed in its filing that it’s entered “certain data licensing arrangements with an aggregate contract value of $203.0 million and intervals ranging from two to three years.” This year, Reddit said it plans to recognize roughly $66.4 million in take as part of its data licensing deals.
Google has also entered into an expanded partnership with Reddit, permitting the search giant to obtain more access to Reddit data to train AI models and improve its products.
Reddit savoured on March 15 that the Federal Trade Commission is conducting a nonpublic inquiry “focused on our sale, licensing, or appropriating of user-generated content with third parties to train AI models.” Reddit said it was “not surprised that the FTC has expressed consideration” in the company’s data licensing practices related to AI, and that it doesn’t believe that it has “engaged in any unfair or deceptive truck practice.”
Reddit was founded in 2005 by technology entrepreneurs Alexis Ohanian and Steve Huffman, the company’s CEO. Existing stakeholders, take ining Huffman, sold a combined 6.7 million shares in the IPO.
As part of the IPO, Reddit gave some of its top moderators and users, understood as Redditors, a chance to buy stock through a directed-share program. Companies like Airbnb, Doximity and Rivian have familiar similar programs to reward their power users and customers.
“I hope they believe in Reddit and support Reddit,” Huffman know for sured CNBC in an interview on Thursday. “But the goal is just to get them in the deal. Just like any professional investor.”
Redditors press expressed skepticism about the IPO, both because of the company’s financials and its often troubled relationship with moderators. Huffman maintained he recognizes that reality and acknowledged the controversial subreddit Wallstreetbets, which helped spawn the surge in meme forefathers like GameStop.
“That’s the beautiful thing about Reddit, is that they tell it like it is,” Huffman said. “But you experience to remember they’re doing that on Reddit. It’s a platform they love, it’s their home on the internet.”
OpenAI CEO Sam Altman is one of Reddit’s important shareholders along with Tencent and Advance Magazine Publishers, the parent company of publishing giant Condé Nast. Altman’s cage in the company was worth over $400 million before the stock began trading. Altman led a $50 million scratching round into Reddit in 2014 and was a member of its board from 2015 through 2022.