On Thursday, Reddit, the Social Media platform ended its first day of trading in New York at 48 per cent above the initial offer prices. This signals an investor appetite for initial public offerings of promising companies. The social media platform is now valued at more than $9 billion. The stock peaked at $57.8 a share, up 70 per cent before it touched $50.44 at the close of the day.
The San Francisco-based company’s initial public offering (IPO) was first priced at $34 a share, with a market value of $6.4 billion. Reddit and its selling shareholders had raised $748 million. Reddit’s IPO has been in the works for over two years now. It had confidentially filed for an IPO in December 2021 but had delayed its IPO amid stock market turmoil. In 2021, the company was valued at $10 billion in a private funding round.
The company’s largest shareholder, Advance Publications, the parent company of Conde Nast, is believed to reap $1.4 billion from the debut, Advance acquired Reddit 18 months after its launch for $10 million.
The other shareholders include Tencent, the Chinese gaming giant, that owns 11 per cent of the company. Tencent had invested $300 million investment in 2019. Open AI CEO, Sam Altman owns 8.7 per cent after his 2014 investment in the company, and Fidelity has made several investments in Reddit owns 9.5 per cent of the company.
The past few years has seen a few large tech IPOs, but Reddit’s IPO is likely to help kickstart the frenzy for technology stocks in the market. However, the next few days will decide if Reddit will be able to keep up the trend.
Reddit was launched in 2004, becoming the core of social media culture. With over 100,000 online forums or subreddits, the platform allows conversations across a wide range and variety of topics. However, its user base is nowhere close to Meta’s Facebook or Elon Musk’s X. Reddit currently has over 73 million unique daily visitors, and Facebook has 2 billion people logging onto its app every day.
Currently, Reddit has reserved 8 per cent of its shares on offer for eligible moderators and users, board members and family and friends of directors and employees. The company has stated that it is in the early stages of monetising its business and is yet to turn an annual profit. With its IPO, the investors will be scrutinising its roadmap to profitability.
