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Reddit\u2019s stock soared in its Wall Street debut as investors pushed the value of the company close to $9 billion seconds after it began trading on the New York Stock Exchange.<\/p>\n
Reddit, which priced its IPO at\u00a0$34 a share<\/a>, debuted Thursday afternoon at $47 a share. At the close of trading, it was up 48% at $50.44, backing off a peak of $57.80.<\/p>\n \u201cThis volatility is not surprising because there has been a lot of buzz around Reddit,\u201d Reena Aggarwal, director of Georgetown University\u2019s Psaros Center for Financial Markets and Policy, noted.<\/p>\n When Reddit\u2019s price initially jumped, she explained, some investors who got an allocation may have sold their shares to cash in on the gains, bringing it back down. She noted that this could to continue in the stock\u2019s early days.<\/p>\n Reddit\u2019s IPO will test the quirky company\u2019s ability to overcome a nearly 20-year history colored by uninterrupted losses, management turmoil and\u00a0user backlashes<\/a>\u00a0to build a sustainable business.<\/p>\n The interest surrounding Reddit stems largely from a large audience that religiously visits the service to discuss a potpourri of subjects that range from silly memes to existential worries, as well as get recommendations from like-minded people.<\/p>\n About 76 million users checked into one of Reddit\u2019s roughly 100,000 communities in December, according to the regulatory disclosures required before the San Francisco company goes public. Reddit set aside up to 1.76 million of 15.3 million shares being offered in the IPO\u00a0for users of its service<\/a>.<\/p>\n Per the usual IPO custom, the remaining shares are expected to be bought primarily by mutual funds and other institutional investors betting Reddit is ready for prime time in finance.<\/p>\n Reddit\u2019s moneymaking potential also has attracted some prominent supporters, including OpenAI CEO Sam Altman, who accumulated a stake as an early investor that has made him one of the company\u2019s biggest shareholders.\u00a0Altman<\/a>\u00a0owns 12.2 million shares of Reddit stock, according to the company\u2019s IPO disclosures.<\/p>\n By the tech industry\u2019s standards, Reddit remains extraordinarily small for a company that has been around as long as it has. Thursday\u2019s opening debut valuation of $9 billion, for example, is still far below the $1.2 trillion market value boasted by Meta Platforms \u2014 whose biggest social media service Facebook<\/a> was started just 18 months earlier than Reddit.<\/p>\n Reddit has never profited from its broad reach while piling up cumulative losses of $717 million. That number has swollen from cumulative losses of $467 million in December 2021 when the company first filed papers to go public before aborting that attempt.<\/p>\n In the recent documents filed for its revived IPO, Reddit attributed the losses to a fairly recent focus on finding new ways to boost revenue.<\/p>\n Not long after it was born, Reddit was sold to magazine publisher Conde Nast for $10 million in deal that meant the company didn\u2019t need to run as a standalone business. Even after Conde Nast parent Advance Magazine Publishers spun off Reddit in 2011, the company said in its IPO filing that it didn\u2019t begin to focus on generating revenue until 2018.<\/p>\n Those efforts, mostly centered around selling ads, have helped the social platform increase its annual revenue from $229 million in 2020 to $804 million last year. But the San Francisco-based company also posted combined losses of $436 million from 2020 through 2023.<\/p>\n Reddit outlined a strategy in its filing calling for even more ad sales on a service that it believes companies will be a powerful marketing magnet because so many people search for product recommendations there.<\/p>\n The company also is hoping to bring in more money by licensing access to its content in deals similar to\u00a0the $60 million that Google recently struck<\/a>\u00a0to help train its artificial intelligence models. That ambition, though, faced an almost immediate challenge when the\u00a0U.S. Federal Trade Commission opened an inquiry<\/a>\u00a0into the arrangement.<\/p>\n Since Thursday just marks Reddit\u2019s first day on the public market, Aggarwal stressed that the first key measure of success will boil down to the company\u2019s next earnings call.<\/p>\n \u201cAs a public company now they have to report a lot more \u2026 in the next earnings release,\u201d she said. \u201cI\u2019m sure the market will watch that carefully.\u201d<\/p>\n Reddit also experienced tumultuous bouts of instability in leadership that may scare off prospective investors. Company co-founders Steve Huffman and\u00a0Alexis Ohanian<\/a>\u00a0\u2014 also the husband of tennis superstar Serena Williams \u2014 both left Reddit in 2009 while Conde Nast was still in control, only to return years later.<\/p>\n Huffman, 40, is now CEO. Although his founder\u2019s letter leading up to this IPO didn\u2019t mention it, Huffman touched upon the company\u2019s past turmoil in another missive included in a December 2021 filing attempt that was subsequently canceled.<\/p>\n \u201cWe lived these challenges publicly and have the scars, learnings, and policy updates to prove it,\u201d Huffman then wrote. \u201cOur history influences our future. There will undoubtedly be more challenges to come.\u201d<\/p>\n ___________________<\/p>\n Liedtke reported from San Francisco.<\/p>\n<\/div>\nSubscribe to the CFO Daily newsletter to keep up with the trends, issues, and executives shaping corporate finance. Sign up<\/a> for free.<\/div>\n