Reddit Shares Jump 62% On Debut: Investors, Analysts React On Social Media
As the most eagerly anticipated initial public offering so far this year, shares in Reddit Inc. (NYSE:RDDT) got off to a blistering start, adding 62% to the $34 IPO price to trade at $55 in opening exchanges.
It was a milestone moment for the 19-year old social media platform, founded by Steve Huffman, CEO, and Aaron Swartz and Alexis Ohanian.
The IPO was not just open to institutional investors. Huffman said the goal was to “level the playing field” by bringing in retail investors as well as institutional players and around 2 million of the 159 million shares on offer were held for retail investors.
Huffman said: “The best investors of Reddit are people who use Reddit.”
One highly speculative inquiry on the subreddit r/RedditIPO asked: “What share price would be equal a $10 billion market cap?”
That, indeed, is the $55 a share level reached at the open, meaning the company has already added $3.6 billion to its IPO valuation of $6.4 billion.
Early Reactions
Early indications before the shares started trading was Reddit stock would see a boost. Some were suggesting the price popped to $55 in pre-debut exchanges of shares – and this was the level at which they were trading just half an hour after debuting at around 1:15 ET.
Seeking Alpha suggested getting the retail crowd involved was prompting speculation that Reddit could turn into a so-called meme stock, “with increased volatility or a major run-up that could leave unfortunate HODLers holding the bag.”
It added: “Hints of irony? Reddit forum r/wallstreetbets was behind the meme mania that took place in 2021, which involved players such as Gamestop and AMC.”
And there were precious few positive comments on social media and other outlets.
Susan Li, a business correspondent for CNBC said on X: “Only during a 2 year IPO drought does a $6 Billion company that’s been unprofitable for 20 years get this much attention.”
Adam Taggart, host of Thoughtful Money, was of a similar opinion. He posted on X: “IMO, I think Reddit will be a good short once the AI-craze cools off, folks will ask: how does this company make enough money?”
Thomas Smale, CEO of FE International, didn’t think the shares would enjoy gains for long, also noting the company’s lack of profits.
He said via email to Benzinga: “With tighter liquidity and higher capital costs, investors are increasingly prioritizing companies with strong fundamentals and clear paths to profitability. At the moment, Reddit lacks a proven profitable business model.”
Photo: Shutterstock
