Reddit, the self-anointed ‘front page of the internet,’ soars in Wall Street debut

Reddit mascot Snoo rings the New York Stock Exchange opening bell, prior to the company's IPO, Thursday, March. 21, 2024. (AP Photo/Yuki Iwamura)

Reddit’s stock soared in its Wall Street debut as investors pushed the value of the company close to $9 billion seconds after it began trading on the New York Stock Exchange.

Reddit, which priced its IPO at $34 a share, debuted Thursday afternoon at $47 a share. At the close of trading, it was up 48% at $50.44, backing off a peak of $57.80.

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“This volatility is not surprising because there has been a lot of buzz around Reddit,” Reena Aggarwal, director of Georgetown University’s Psaros Center for Financial Markets and Policy, noted.

When Reddit’s price initially jumped, she explained, some investors who got an allocation may have sold their shares to cash in on the gains, bringing it back down. She noted that this could to continue in the stock’s early days.

Reddit’s IPO will test the quirky company’s ability to overcome a nearly 20-year history colored by uninterrupted losses, management turmoil and user backlashes to build a sustainable business.

The interest surrounding Reddit stems largely from a large audience that religiously visits the service to discuss a potpourri of subjects that range from silly memes to existential worries, as well as get recommendations from like-minded people.

About 76 million users checked into one of Reddit’s roughly 100,000 communities in December, according to the regulatory disclosures required before the San Francisco company goes public. Reddit set aside up to 1.76 million of 15.3 million shares being offered in the IPO for users of its service.

The remaining shares are expected to be bought primarily by mutual funds and other institutional investors betting Reddit is ready for prime time in finance.

Reddit’s moneymaking potential also has attracted some prominent supporters, including OpenAI CEO Sam Altman, who accumulated a stake as an early investor that has made him one of the company’s biggest shareholders. Altman owns 12.2 million shares of Reddit stock, according to the company’s IPO disclosures.

By the tech industry’s standards, Reddit remains extraordinarily small for a company that has been around as long as it has. Thursday’s opening debut valuation of $9 billion, for example, is still far below the $1.2 trillion market value boasted by Meta Platforms — whose biggest social media service Facebook was started just 18 months earlier than Reddit.

Reddit has never profited from its broad reach while piling up cumulative losses of $717 million. That number has swollen from cumulative losses of $467 million in December 2021 when the company first filed papers to go public before aborting that attempt.

In the recent documents filed for its revived IPO, Reddit attributed the losses to a fairly recent focus on finding new ways to boost revenue.

Not long after it was born, Reddit was sold to magazine publisher Conde Nast for $10 million in deal that meant the company didn’t need to run as a standalone business. Even after Conde Nast parent Advance Magazine Publishers spun off Reddit in 2011, the company said in its IPO filing that it didn’t begin to focus on generating revenue until 2018.

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