Reddit Stock Soars in Highly Anticipated Market Debut

Reddit (RDDT) stock soared on its first day of trading, ending the day up nearly 50% from its initial public offering price of $34 per share.

The stock closed at $50.44 on Thursday, up 48% from the IPO price and giving the company a market capitalization just north of $8 billion.

The social network's entry into the New York Stock Exchange was highly anticipated, given the lull in public listings over the past two years. Reddit is the first major social media company to go public since Pinterest (PINS) in 2019.

The user-generated discussion-style platform has been around since 2005, but it gained popularity during the meme frenzy of 2021. At that time, retail traders on the WallStreetBets subreddit were encouraging short sales on stocks of the Video game retailer GameStop (GME), movie theater chain (AMC) and other heavily shorted stocks.

The IPO was also expected to gauge investor appetite for technology-related offerings at a time of tight monetary policy.

Reddit's revenue in 2023 jumped about 20% year over year to $804 million, according to the company's report. S-1 filing. About 98% of sales in the third quarter of last year were generated by advertising on the platform.

The company's net loss fell from $158.6 million in 2022 to $90.8 million last year.

In an interview with Yahoo Finance, co-founder and CEO Steve Huffman noted that the company was profitable based on adjusted EBITDA in the second half of last year.

“I think if we can continue this, we're in great shape,” Huffman told Yahoo Finance's Brian Sozzi ahead of the listing Thursday morning. “We have such high margins that if [we] just keep selling and pay attention to costs, this business is growing in a truly impressive way. »

The site had 500 million monthly visitors as of December 2023, according to the S-1 filing, and an average of 73.1 million unique daily active users in the three months ending in December.

Reddit's filing also indicates that the company sees an opportunity to license its data for use by AI.

The story continues

“On the data side, we have almost two decades of human conversations about anything and everything. In an AI world, where everything is increasingly written by AI, AI-generated content man actually becomes more valuable over time,” Huffman said Thursday. .

In a nod to Redditors, the company has set aside 1.76 million shares to sell to eligible users and moderators on the platform without a lock-up period.

The move lends itself to volatility, Headline partner Kamran Ansari told Yahoo Finance in a recent interview.

“You could see a big rise in the stock price and then a decline,” he said. “Because there is such a rabid community around it, Reddit users, you might see Reddit itself ironically becoming a meme stock like you saw with AMC and GameStop.”

Ines is a senior economics reporter for Yahoo Finance. Follow her on @ines_ferre

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