Reddit’s stock price soared 70% in its initial public offering on Thursday, the first since a major social media company’s IPO. interest Launched in 2019.
The 19-year-old website, which hosts millions of online forums, priced its IPO at $34 a share on Wednesday, above its expected range. Reddit and selling shareholders raised about $750 million through the offering, of which the company raised about $519 million.
The stock opened at $47 and hit a high of $57.80. At its peak on Thursday, the company’s market value was about $10.9 billion. Reddit’s stock price fell to $48.64 about half an hour after trading began, giving the company a market value of about $7.9 billion.
Reddit, which trades under the ticker “RDDT,” is testing investor appetite for new technology stocks after a long drought of IPOs.Hardly any venture-backed tech companies have gone public since the tech boom peaked in late 2021, and those that have — e.g. Instant shopping cart and Clavijo Last year – mediocre.On Wednesday, data center hardware companies Astra Labs The company’s shares surged 72% in its Nasdaq listing, underscoring investor excitement about businesses tied to the artificial intelligence boom.
At the IPO price, Reddit is valued at about $6.5 billion, a reduction from the company’s private market valuation of $10 billion in 2021, a boom year for the technology industry. Sentiment changed in 2022, with rising interest rates and soaring inflation forcing investors out of riskier assets. Startups responded by cutting jobs, slashing valuations, and shifting their focus toward profits rather than growth.
Reddit detailed in its prospectus that Reddit’s annual sales will grow 20% to $804 million in 2023 from $666.7 million the previous year. The company recorded a net loss of $90.8 million last year, narrowing from a loss of $158.6 million in 2022.
Reddit’s market capitalization at the time of its IPO gave it a price-to-sales ratio of about 8, based on revenue over the past four quarters. letter 6.1 times trading revenue, Yuan has a multiple of 9.7, Pinterest has a multiple of 7.5, break It trades at 3.9 times sales, according to FactSet.
In addition to these companies, Reddit also includes X, Discord, Wikipedia, and Amazon’s The Twitch streaming service is listed as a competitor in its prospectus.
Reddit is betting that data licensing could become a major source of revenue, saying in its filing that it has signed “certain data licensing arrangements with a total contract value of $203 million and a term of two to three years.” This year, Reddit said it plans to recognize about $66.4 million in revenue as part of its data licensing deals.
Google has also entered the expansion phase partnership Partnering with Reddit gives the search giant access to more Reddit data to train artificial intelligence models and improve its products.
Reddit revealed on March 15 that the Federal Trade Commission was conducting a private investigation “focused on our selling, licensing, or sharing user-generated content with third parties to train artificial intelligence models.” Reddit said the FTC is investigating the company Expressing interest in data licensing practices related to artificial intelligence was “not surprising” and did not believe the company was “engaged in any unfair or deceptive trade practices.”
Reddit was founded in 2005 by technology entrepreneur Alexis Ohanian and company CEO Steve Huffman. Existing stakeholders, including Hoffman, sold a total of 6.7 million shares in the IPO.
As part of the IPO, Reddit offered some of its top moderators and users, known as Redditors, the opportunity to buy shares through a directed stock program.company likes Airbnb, Dosimiti and Rivian Already use similar programs to reward their premium users and customers.
“I hope they trust Reddit and support Reddit,” Huffman told CNBC on Thursday. “But our goal is just to get them involved in trading. Just like any professional investor.”
Reddit users were skeptical of the IPO, both because of the company’s financial health and because of its often troubled relationship with moderators.Huffman said he recognizes this reality and acknowledged the controversial Reddit subreddit Wallstreetbets, which helped spawn projects like game station.
“The beauty of Reddit is that they tell things as they are,” Huffman said. “But you have to remember, they’re doing this on Reddit. It’s their beloved platform, it’s their home on the internet.”
OpenAI CEO Sam Altman is one of Reddit’s major shareholders Tencent and Advance Magazine Publishers, the parent company of publishing giant Condé Nast. Altman’s stake in the company was worth more than $400 million before the stock began trading. Altman led a $50 million funding round in Reddit in 2014 and served on its board of directors from 2015 to 2022.
watch: Investors are watching the Reddit IPO “very closely.”
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