Reddit's stock surged 48% on its first day of trading in New York, indicating a potential rebound in investor interest in initial public offerings (IPOs) of profitable but promising businesses.
Reddit, which deceived investors by portraying its material as a training environment for artificial intelligence (AI) programmes, has not produced a profit on an annual basis since its debut in 2005. Last month, Reuters revealed that Reddit and Google had reached an approximate annual agreement for data licencing worth $60 million.
Even though Reddit still makes the majority of its money from advertising, it highlighted artificial intelligence (AI) as a growing field during its IPO marketing tour. The U.S. Federal Trade Commission is investigating its AI data licencing agreements, it also revealed last week.
"At the core we are a growth company. Achieving our mission means that we want to grow users and community," said Jen Wong, Chief Operations Officer at Reddit.
After pricing at $34, the upper end of the business's stated price range, during the initial public offering (IPO), shares of the San Francisco-based company began trading at $47 on the New York Stock Exchange on Thursday. They traded at $50.44 in the end.
Reddit raised $748 million from its initial public offering (IPO), which valued the firm at $6.4 billion. Reddit was valued at $10 billion in a 2021 private financing round, and the firm may not have required to lower its expectations for valuation so much in order to launch the initial public offering (IPO) given the positive reaction from the stock market.
It's taken a while for Reddit to enter the public domain. It quietly registered for an initial public offering (IPO) in December 2021, but the market for IPOs was severely frozen and forced to postpone due to a stock market meltdown brought on by Russia's war in Ukraine and the Federal Reserve's interest rate hikes.
According to Josh White, an assistant professor of finance at Vanderbilt University, Reddit's initial public offering (IPO) demonstrated that, for the first time in at least three years, investors were prepared to overlook the company's losses due to its potential for development.
"We don't get many large tech IPOs. Those tend to be very popular because it's hard to buy that kind of growth," White said.
The "meme-stock" scandal of 2021, in which a group of regular investors banded together on Reddit's site "wallstreetbets" to purchase shares of heavily shorted businesses like GameStop sent the social media platform's popularity to unprecedented heights.
Reddit has set aside 8% of the available shares for qualifying users and moderators, specific board members, and friends and family of staff members and directors as part of its user incentive programme.
Additionally, it made some shares available to retail investors via the online brokerage services provided by Fidelity Brokerage Services, SoFi Morgan Stanley Wealth Management, and Robinhood.
However, experts warn that there are several risks associated with this decision. Usually barred from bidding during an initial public offering (IPO), ordinary traders who wish to learn about a recently listed company purchase shares only after they begin trading.
Some demand may be reduced if early access to the IPO is granted. Additionally, since they are not subject to a lock-up period, these buyers may decide to sell as soon as the stock begins trading, which could lead to an increase in price volatility.
"I am unaware of any company that truly gains from giving users shares," stated Alan Vaksman, the founding partner of Launchbay Capital, an investing firm.
The social media startup Stocktwits.com, which tracks message volumes and posts on its platform pertaining to a company's ticker symbol, revealed that retail mood on Reddit was "extremely bullish."
On Reddit's "wallstreetbets" thread, however, opinions were more divided, with some users stating they would short the stock once it begins trading.
Reddit, which debuted in 2005, quickly rose to prominence as a major figure in social media culture. Its well-known emblem, an extraterrestrial on an orange backdrop, is among the most recognisable images on the internet.
According to co-founder and CEO Steve Huffman, its 100,000 online forums, or "subreddits," facilitate discussions on a wide range of subjects, from "the sublime to the ridiculous, the trivial to the existential, the comic to the serious".
In his letter, Huffman stated that he had sought assistance from one of the subreddits in order to stop drinking. In 2012, the users of the website conducted a "AMA" (also known as "ask me anything") with former US President Barack Obama.
However, in the realm of social media, the company has not been able to match the success of its larger competitors, Facebook from Meta Platforms and X from Elon Musk.
"The real news is going to be after the first earnings call - where are they headed, what are the results looking like, what changes are they going to make," said Reena Aggarwal, director of the Georgetown University Psaros Center for Financial Markets and Policy.
(Source:www.moneycontrol.com)
Reddit, which deceived investors by portraying its material as a training environment for artificial intelligence (AI) programmes, has not produced a profit on an annual basis since its debut in 2005. Last month, Reuters revealed that Reddit and Google had reached an approximate annual agreement for data licencing worth $60 million.
Even though Reddit still makes the majority of its money from advertising, it highlighted artificial intelligence (AI) as a growing field during its IPO marketing tour. The U.S. Federal Trade Commission is investigating its AI data licencing agreements, it also revealed last week.
"At the core we are a growth company. Achieving our mission means that we want to grow users and community," said Jen Wong, Chief Operations Officer at Reddit.
After pricing at $34, the upper end of the business's stated price range, during the initial public offering (IPO), shares of the San Francisco-based company began trading at $47 on the New York Stock Exchange on Thursday. They traded at $50.44 in the end.
Reddit raised $748 million from its initial public offering (IPO), which valued the firm at $6.4 billion. Reddit was valued at $10 billion in a 2021 private financing round, and the firm may not have required to lower its expectations for valuation so much in order to launch the initial public offering (IPO) given the positive reaction from the stock market.
It's taken a while for Reddit to enter the public domain. It quietly registered for an initial public offering (IPO) in December 2021, but the market for IPOs was severely frozen and forced to postpone due to a stock market meltdown brought on by Russia's war in Ukraine and the Federal Reserve's interest rate hikes.
According to Josh White, an assistant professor of finance at Vanderbilt University, Reddit's initial public offering (IPO) demonstrated that, for the first time in at least three years, investors were prepared to overlook the company's losses due to its potential for development.
"We don't get many large tech IPOs. Those tend to be very popular because it's hard to buy that kind of growth," White said.
The "meme-stock" scandal of 2021, in which a group of regular investors banded together on Reddit's site "wallstreetbets" to purchase shares of heavily shorted businesses like GameStop sent the social media platform's popularity to unprecedented heights.
Reddit has set aside 8% of the available shares for qualifying users and moderators, specific board members, and friends and family of staff members and directors as part of its user incentive programme.
Additionally, it made some shares available to retail investors via the online brokerage services provided by Fidelity Brokerage Services, SoFi Morgan Stanley Wealth Management, and Robinhood.
However, experts warn that there are several risks associated with this decision. Usually barred from bidding during an initial public offering (IPO), ordinary traders who wish to learn about a recently listed company purchase shares only after they begin trading.
Some demand may be reduced if early access to the IPO is granted. Additionally, since they are not subject to a lock-up period, these buyers may decide to sell as soon as the stock begins trading, which could lead to an increase in price volatility.
"I am unaware of any company that truly gains from giving users shares," stated Alan Vaksman, the founding partner of Launchbay Capital, an investing firm.
The social media startup Stocktwits.com, which tracks message volumes and posts on its platform pertaining to a company's ticker symbol, revealed that retail mood on Reddit was "extremely bullish."
On Reddit's "wallstreetbets" thread, however, opinions were more divided, with some users stating they would short the stock once it begins trading.
Reddit, which debuted in 2005, quickly rose to prominence as a major figure in social media culture. Its well-known emblem, an extraterrestrial on an orange backdrop, is among the most recognisable images on the internet.
According to co-founder and CEO Steve Huffman, its 100,000 online forums, or "subreddits," facilitate discussions on a wide range of subjects, from "the sublime to the ridiculous, the trivial to the existential, the comic to the serious".
In his letter, Huffman stated that he had sought assistance from one of the subreddits in order to stop drinking. In 2012, the users of the website conducted a "AMA" (also known as "ask me anything") with former US President Barack Obama.
However, in the realm of social media, the company has not been able to match the success of its larger competitors, Facebook from Meta Platforms and X from Elon Musk.
"The real news is going to be after the first earnings call - where are they headed, what are the results looking like, what changes are they going to make," said Reena Aggarwal, director of the Georgetown University Psaros Center for Financial Markets and Policy.
(Source:www.moneycontrol.com)
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