Reddit soared in its Wall Street debut as investors pushed the value of the company close to nine billion US dollars seconds after it began trading on the New York Stock Exchange.
Reddit, which priced its IPO at 34 dollars a share, debuted Thursday afternoon at 47 dollars a share.
The going price has climbed even higher since, with shares for the self-anointed “front page of the internet” soaring more than 55%.
The IPO will test the quirky company’s ability to overcome a nearly 20-year history coloured by uninterrupted losses, management turmoil and occasional user backlashes to build a sustainable business.
“The supply is pretty limited and there’s strong demand, so my sense is that this is going to be a hot IPO,” Reena Aggarwal, director of Georgetown University’s Psaros Centre for Financial Markets and Policy, said ahead of Reddit’s trading on Thursday.
“The good news for Reddit is it’s a hot market.”
Still, she also anticipates Reddit’s IPO to be volatile.
Even with a sizeable “pop”, it’s possible that some might sell their shares to reap their gains soon after, potentially causing prices to drift.
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.
About 76 million users checked into one of Reddit’s 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 for users of its service.
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.
Reddit’s moneymaking potential also has attracted some prominent supporters, including OpenAI chief executive Sam Altman, who accumulated a stake as an early investor that has made him one of the company’s biggest shareholders.
Mr Altman owns 12.2 million shares of Reddit stock, according to the company’s IPO disclosures.
Other early investors in Reddit have included PayPal co-founder Peter Thiel, Academy Award-winning actor Jared Leto and rapper Snoop Dogg.
None of them are listed among Reddit’s largest shareholders heading into the IPO.
By the tech industry’s standards, Reddit remains extraordinarily small for a company that has been around as long as it has.
Reddit has never profited from its broad reach while piling up cumulative losses of 717 million US dollars.
That number has swollen from cumulative losses of 467 million US dollars in December 2021 when the company first filed papers to go public before aborting that attempt.
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.
Not long after it was born, Reddit was sold to magazine publisher Conde Nast for 10 million dollars in a deal that meant the company did not 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 did not begin to focus on generating revenue until 2018.
