The company’s stock surged about 70% post-IPO, potentially earning $1.4bn for Condé Nast’s parent.
Reddit’s (RDDT.N) debut on the New York Stock Exchange saw its shares closing 48% higher, hinting at a renewed interest from investors in IPOs of promising yet unprofitable firms.
In its trading debut on Thursday, Reddit’s shares closed 48% higher than their initial offer prices, marking a significant moment as the social media platform’s market value exceeded $9bn. The stock reached a peak of $57.80 per share, up 70%, before settling at $50.44 by day’s end.
Initially priced at $34 per share, the San Francisco-based company’s IPO valued it at $6.4bn, with proceeds totaling $748m for the company and its selling shareholders.
This highly anticipated IPO had been in progress for over two years, initially filing confidentially in December 2021 but postponing due to stock market instability. Despite the current valuation dip from 2021’s $10bn valuation during a private funding round, Reddit’s public debut still garnered significant attention.
Reddit’s strong market debut promises substantial gains for its primary stakeholder, Advance Publications. The parent company of Condé Nast, home to prominent publications like the New Yorker, Vogue, and Wired, anticipates reaping up to $1.4bn from the launch. Advance acquired Reddit for $10m just 18 months after its inception.
Last year, Reddit co-founder and CEO Steve Huffman received a hefty compensation package worth $193m. Interestingly, Alexis Ohanian, the site’s co-founder known for his public presence, appears absent from the company’s filings with US financial regulators, unlike Huffman, who maintained a background technical role.
Among other notable shareholders are Chinese gaming giant Tencent, holding an 11% stake following a $300m investment round in 2019; Fidelity, with a 9.5% ownership from multiple investments in Reddit; and OpenAI CEO Sam Altman, possessing an 8.7% stake from an investment made in 2014. Reddit entered the esteemed Y Combinator startup accelerator program soon after its establishment in 2005, where Altman later served as president.
Given the scarcity of significant tech IPOs in recent years, the fervor for technology stocks is expected to provide Reddit a favorable market launch, according to Julian Klymochko, CEO of Accelerate Financial Technologies. However, investors will remain vigilant in observing the market’s trajectory in the coming weeks.
If Reddit underperforms, it could dampen confidence in the IPO market,” Klymochko cautioned, adding that many companies might halt their IPO plans.
Established in 2005, Reddit swiftly became a cornerstone of social media culture, sporting an iconic logo—a stylized alien head on an orange backdrop—that’s universally recognized online. With its slogan, “The front page of the internet,” Reddit hosts over 100,000 online forums, known as “subreddits,” facilitating discussions spanning from the trivial to the profound, as Huffman explains.
Huffman himself sought support from a subreddit to overcome alcohol addiction, as revealed in his letter. In 2012, former US President Barack Obama engaged in an “AMA” (ask me anything) session with Reddit users.
Despite its cult-like status, Reddit hasn’t matched the success of its larger competitors like Meta’s Facebook and Elon Musk’s X. It boasts approximately 73 million unique daily visitors, contrasting with Facebook’s claim of 2 billion daily app logins.
In an effort to appreciate its user base, Reddit has allocated 8% of its shares for eligible users, moderators, select board members, and acquaintances of its staff and directors.
The company acknowledges it’s still early in monetizing its business and has yet to achieve annual profitability. Analysts anticipate investors closely examining its path to profitability.
