Reddit’s Stock Market Debut Sees Shares Close 48% Above Initial Offer Prices

Social media platform Reddit made its stock market debut on the New York Stock Exchange under the stock ticker “RDDT” on Thursday last week, after almost 20 years of existence.

The company ended its first day of trading at $50.44, which is 48% higher than its Initial Public Offer (IPO) price of $34 per share, indicating a likely surge in investors interest in the company.

Reddit is a vast online community platform where users can engage in discussions and share articles, memes, and information on a wide range of topics. It’s often referred to as the “front page of the internet” due to its popularity and influence in shaping online discourse. Reddit was founded in 2005 by Steve Huffman, current CEO of the company, and technology entrepreneur Alexis Ohanian.

The company priced its first IPO at $34 per share and closed trading at $50.44, giving it a market capitalization of about $9.5 billion, according to CNBC. The surge in Reddit’s value comes after several years of struggling to make a profit, despite its popularity among users. Last year, the company reported a net loss of nearly $91 million, according to The Washington Post.

At the IPO, the company and its shareholders raised a total of $748 million, with Reddit itself pocketing around $519 million from the sale of its shares. This is the first IPO by a major social media company since Pinterest did so back in 2019.

With the new funding, Reddit has more resources to invest in improving its services, developing new features, or expanding its platform. However, going public also means that Reddit will now be under increased scrutiny from investors and shareholders, who may have expectations for the company to generate profits and grow its business.

How The IPO Affects Redditers

It is expected that this IPO will help Reddit generate more annual income. With shareholders now dictating the tune, Reddit may find a way to attract more advertisers to its platform.

The company faced backlash after announcing in April that it would start charging large-scale companies for using its application programming interface (API). The API allows external entities to download and process Reddit’s extensive content, including memes, GIFs, videos, and discussion threads.

Redditers may likely react again if the platform makes changes that affect the quality of interactions among community members.

Reddit thrives on the “authenticity” of information shared across the platform from real people looking for honest answers. Reddit has become an almost reliable source of information for this reason, as seen by subreddit discussions showing higher and higher up in Google search results.

Data generated on the platform has also been used for training AI tools, a reason why it struck a data licensing deal worth $60 million with Google in February.

It’s not very clear how the IPO changes the status quo on Reddit, but the leaders of the company may not want to make changes that will generate major pushbacks from its over 850 million monthly active users.

Reddit’s Retail Share Allocation

The social media platform also reserved 8% of the shares in the IPO for eligible users and moderators. This is part of its plan to reward its committed users, subreddit moderators, certain board members, friends, and family members of employees and directors.

Omar Abbasi, a 34-year-old software engineer, received one such offer, partly due to his volunteer work as a moderator for Reddit’s gaming communities, reported The Washington Post. Subreddit moderators help to regulate discussions on different Reddit communities. However, Abbasi declined the offer, citing concerns about the associated risks.

He referenced Facebook’s experience after its initial public offering (IPO) in 2012, where share prices remained stagnant for over a year following the public listing.