Reddit Stocks Soar After Initial Public Offering

  Reddit

Reddit’s stock (RDDT) experienced a remarkable surge on its first day of trading, closing almost 50% higher than its initial public offering (IPO) price of $34 per share. Trading just above $50 at market close on Thursday, Reddit’s debut on the New York Stock Exchange was eagerly anticipated, marking the first major social media company to go public since Pinterest (PINS) in 2019.

A Historic Moment Amidst a Quiet Period

This IPO came after a two-year period of subdued public listings. Reddit’s platform, which has been active since 2005, gained significant recognition in 2021 during a meme frenzy. At the time, retail traders on the subreddit WallStreetBets instigated short squeezes on shares of video game retailer GameStop (GME), theater chain AMC, and other heavily shorted stocks. The IPO is seen as a litmus test for investors’ appetite for tech-related offerings at a time of tight monetary policy.

Improved Financial Performance

Reddit’s financial performance has also improved. Revenue in 2023 jumped by about 20% year over year to $804 million, according to its S-1 filing. Approximately 98% of sales in the third quarter of last year were generated from advertising on the platform, and the net loss reduced from $158.6 million in 2022 to $90.8 million last year.

Profitability and Future Potential

Co-founder and CEO Steve Huffman stated that the company was profitable on an adjusted EBITDA basis in the second half of last year. He expressed confidence about the company’s high margins and scalability, hinting at a bright future.

The user base has also been growing robustly. As of December 2023, the site reported 500 million monthly visitors and an average of 73.1 million unique daily active users during the three months ending in December. Huffman also indicated that Reddit sees an opportunity to license its data for AI use, with nearly two decades of human conversation data that could be more valuable in an AI-driven world.