Reddit pops 48% in NYSE debut after selling shares at top of range

Reddit
shares
jumped
48%
in
their
debut
on
Thursday
in
the
first
initial
public
offering
for
a
major
social
media
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
share,
the
top
of
the
expected
range.
Reddit
and
selling
shareholders
raised
about
$750
million
from
the
offering,
with
the
company
collecting
about
$519
million.

The
stock
opened
at
$47
and
reached
a
high
of
$57.80,
marking
a
70%
increase
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
symbol
“RDDT,”
Reddit
is
testing
investor
appetite
for
new
tech
stocks
after
an
extended
dry
spell
for
IPOs.
Since
the
peak
of
the
technology
boom
in
late
2021,
hardly
any
venture-backed
tech
companies
have
gone
public
and
those
that
have
—
like


Instacart
and


Klaviyo
last
year
—
have
underwhelmed.
On
Wednesday,
data
center
hardware
company


Astera
Labs
made
its
public
market
debut
on
Nasdaq
and
saw
its

shares
soar
72%,
underscoring
investor
excitement
over
businesses
tied
to
the
surge
in

artificial
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
industry.
The
mood
changed
in
2022,
as

rising
interest
rates
and
soaring
inflation
pushed
investors
out
of
high-risk
assets.
Startups

responded
by
conducting
layoffs,
trimming
their
valuations
and
shifting
their
focus
to
profit
over
growth.

Reddit’s
annual
sales
for
2023
rose
20%
to
$804
million
from
$666.7
million
a
year
earlier,
the
company
detailed
in
its
prospectus.
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
revenue
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
times
revenue,


Meta
has
a
multiple
of
9.7,
Pinterest’s
sits
at
7.5
and


Snap
trades
for
3.9
times
sales,
according
to
FactSet.

In
addition
to
those
companies,
Reddit
also
counts
X,
Discord,
Wikipedia
and


Amazon’s
Twitch
streaming
service
as
competitors
in
its
prospectus.

Reddit
is
betting
that
data
licensing
could
become
a
major
source
of
revenue,
and
said
in
its
filing
that
it’s
entered
“certain
data
licensing
arrangements
with
an
aggregate
contract
value
of
$203.0
million
and
terms
ranging
from
two
to
three
years.”
This
year,
Reddit
said
it
plans
to
recognize
roughly
$66.4
million
in
revenue
as
part
of
its
data
licensing
deals.

Google
has
also
entered
into
an
expanded

partnership
with
Reddit,
allowing
the
search
giant
to
obtain
more
access
to
Reddit
data
to
train
AI
models
and
improve
its
products.

Reddit

revealed
on
March
15
that
the
Federal
Trade
Commission
is
conducting
a
nonpublic
inquiry
“focused
on
our
sale,
licensing,
or
sharing
of
user-generated
content
with
third
parties
to
train
AI
models.”
Reddit
said
it
was
“not
surprised
that
the
FTC
has
expressed
interest”
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
trade
practice.”

Reddit
was
founded
in
2005
by
technology
entrepreneurs
Alexis
Ohanian
and
Steve
Huffman,
the
company’s
CEO.
Existing
stakeholders,
including
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,
known
as
Redditors,
a
chance
to
buy
stock
through
a

directed-share
program.
Companies
like


Airbnb,


Doximity
and


Rivian
have
used
similar
programs
to
reward
their
power
users
and
customers.

“I
hope
they
believe
in
Reddit
and
support
Reddit,”
Huffman
told
CNBC
in
an
interview
on
Thursday.
“But the
goal
is
just
to
get
them
in
the
deal.
Just
like
any
professional
investor.”

Redditors
have
expressed
skepticism
about
the
IPO,
both
because
of
the
company’s
financials
and
its
often
troubled
relationship
with
moderators.
Huffman
said
he
recognizes
that
reality
and
acknowledged
the
controversial
subreddit
Wallstreetbets,
which
helped
spawn
the
surge
in
meme
stocks
like


GameStop.

“That’s
the
beautiful
thing
about
Reddit,
is
that
they
tell
it
like
it
is,”
Huffman
said.
“But
you
have
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
major
shareholders
along
with


Tencent
and
Advance
Magazine
Publishers,
the
parent
company
of
publishing
giant
Condé
Nast.
Altman’s
stake
in
the
company
was
worth
over
$400
million
before
the
stock
began
trading.
Altman
led
a
$50
million
funding
round
into
Reddit
in
2014
and
was
a
member
of
its
board
from
2015
through
2022.