reddit The post-IPO rally continues despite one prominent analyst giving the company a hold rating.
Reddit shares rose 15% to around $68.88 in midday trading on Tuesday, underscoring investor interest in the company, which is the first major social media company to go public since Pinterest’s 2019 IPO. The company’s shares rose about 30% in closing trading on Monday, kicking off Reddit’s first week as a publicly traded company following last week’s initial public offering (IPO) in which the company raised about $750 million.
About 34.9 million shares of Reddit stock changed hands on Tuesday, the highest since the company’s opening day trading volume of 48.7 million shares. Reddit and existing shareholders sold a total of 22 million shares in the IPO.
Investors continued to support Reddit even though New Street Research gave the company a neutral rating “after the stock surge,” analysts wrote in a note released on Tuesday.
Analysts at New Street Research, the first analyst firm to post a rating on the stock on Reddit, said they would not change their $54 price target and expected “volatility on the first earnings report (date still to be determined)” , we assume early May) and three days after the lockup expires,” referring to the 180-day period during which certain Reddit shareholders are prohibited from selling their shares.
New Street analysts wrote that “the OpenAI data licensing win has been baked into the stock,” meaning investors believe Reddit would benefit financially if it signed a data licensing agreement with the makers of ChatGPT. Considering that OpenAI CEO Sam Altman still holds a 9% stake in Reddit, investors expect such transactions to “increase soon.”
Altman is an investor, former board member and one of Reddit’s largest shareholders, along with Chinese tech giant Tencent and Advance Magazine Publishers, the parent company of publishing giant Condé Nast. His stake in Reddit increased by $200 million after Reddit’s IPO, to about $613 million.
New Street analysts explain that the upside case for Reddit’s data licensing business hinges on the current boom in generative artificial intelligence, which is driven by large language models and related models such as ChatGPT’s text generation software and Google’s Gemini image generation tool. and other software to provide support. Although Reddit’s core business is online advertising, it points to data licensing as a potentially huge revenue stream.It also recently entered into an expanded partnership with Google, allowing the search giant to right to use More Reddit material to train its artificial intelligence model.
However, New Street analysts noted that the FTC is investigating Reddit’s data licensing business, which Reddit disclosed in a company filing in early March, saying “the FTC’s expression of interest is not surprising.” Surprised” and indeed “do not believe we engage in any unfair or deceptive trade practices.”
“This may seem relatively benign at first glance, but it may be an open question,” New Street analysts wrote. “The FTC investigation is likely to slow down the pace of new deal signings and will certainly require attention,” they noted. time to dedicate time to the investigation (i.e. the opportunity cost to RDDT’s legal team).”
Meanwhile, some Reddit users took to the company’s various finance-related subreddits on Tuesday to discuss the company’s rise in stock price since its IPO. Some of these users, as well as certain company employees and their family members, were part of Reddit’s targeted stock program and were not subject to the lock-up period, so they collectively made millions of dollars in profits on the day Reddit went public. New York Stock Exchange.
A Reddit user named “bkarp00” wrote Regarding Reddit’s rise, “it looks like all the people cashing in on the IPO quickly are helping today’s rise, and there are fewer and fewer people willing to sell at these levels,” referring to shareholders who believe the value of Reddit stock will continue to rise.
Another Reddit user with the username “memory–” agreed, explaining, “If Facebook’s users are worth $30B per quarter and most of them don’t use reddit, neither will the majority of Reddit users.” Without Facebook, how undervalued is Reddit?”
User “IrishRun” wrote, “I’ve been kicking myself for not buying more shares, but there’s no guarantee I’ll receive the requested amount, and then I might still wish I’d bought more shares.”
Meanwhile, within Reddit’s infamous r/WallStreetBets subreddit, known for popularizing so-called meme stocks like GameStop, many members ignored Reddit’s rally in favor of Trump Media Technology Group’s Nasdaq debut The debut was arbitrary Tuesday morning, during which shares were up about 50%.
watch: Kramer’s Mad Dash Reddit
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