- Reddit debuted its highly anticipated IPO on Thursday, pricing shares at $34 which opened 38% above the offer price and valuing the company at $6.4 billion.
- Reddit had confidentially filed for an IPO in late 2021 but delayed due to market volatility; it reserved 8% of shares for users, moderators and insiders.
- While Reddit’s IPO was successful, analysts will watch its plans to monetize users and shift to profitability as a public company.
Reddit, the popular social media platform, made its highly anticipated initial public offering (IPO) on Thursday. The company priced its shares at the top of its projected range, with the stock opening 38% above the offer price. This robust debut could set the tone for other tech companies planning to go public.
Details of the IPO
Reddit priced its IPO at $34 per share, valuing the company at $6.4 billion. The offering raised $748 million for Reddit and its selling shareholders.
The company had confidentially filed for an IPO in late 2021 but delayed plans due to market volatility. Reddit reserved 8% of offered shares for users, moderators and other insiders, an unusual move.
Analysts See Strong Debut for Reddit
Analysts said Reddit’s popularity and cult-like following could drive a successful debut. Josh White, assistant professor of finance at Vanderbilt University, said “We don’t get many large tech IPOs. Those tend to be very popular.”
Some see risks in Reddit’s large retail allocation. But strong retail demand was evident, with trading platform Stocktwits showing extremely bullish sentiment toward Reddit.
Reddit’s Path to Profitability in Focus
While Reddit now joins the ranks of publicly traded tech firms, it has yet to consistently turn an annual profit. Analysts will watch Reddit’s plans to monetize its large user base.
Reena Aggarwal, director of Georgetown’s Psaros Center, said earnings reports will reveal “where are they headed, what are the results looking like, what changes are they going to make?”
Conclusion
Reddit’s blockbuster IPO shows the continued appetite for new tech offerings. But the company still faces challenges in shifting from a privately-held community site to a profitable public company. Its stock’s performance in coming weeks will be an important test.
