Shares in Reddit jumped as much as 70 percent as the social media site made its hotly-anticipated stock market debut.
Shares opened 38 percent above their initial public offering (IPO) price – giving investors that initially sold a huge windfall.
The 19-year-old company, which hosts thousands of online communities, priced its IPO at $34 a share on Wednesday.
But when shares began trading on the New York Stock Exchange they immediately jumped up to $47 – up 38 percent on the IPO price.
Prices then reached as high as $57.80 – a 70 percent rise on its target price.
A mascot of the recognizable Reddit logo rang the opening bell at the New York Stock Exchange on Thursday morning
That gives the company, which trades under the ticker ‘RDDT’, a valuation of over $10 billion at its peak.
The company’s stock market debut is likely to spur a flurry of commentary on Reddit’s own platform, as well as competing social media outlets.
CEO and co-founder Steve Huffman visited Wall Street this morning, where the recognizable Reddit logo mascot rang the opening bell.
Some so-called ‘Redditors’ had complained the San Francisco-based company is selling out to Wall Street by going public.
The company is famous for the ‘meme stock’ saga of 2021, where Reddit users drove up prices of highly shorted companies in pushback to investors betting against them. Many saw this as a victory for the ‘little guy’ over Wall Street giants.
Reddit’s stock market debut has been on the cards for more than two years. It confidentially filed for an IPO at the end of 2021, but was delayed due to rising interest rates and the stock market decline in 2022.
The IPO will test the company’s ability to overcome a history colored by losses, management turmoil and occasional user backlashes to build a sustainable business.
Reddit was launched in 2005 by Huffman and Alexis Ohanian as a place where users could freely submit content, whether that was photos, videos, memes, serious advice or random observations.
These are then be ‘upvoted’ or ‘downvoted’ by other users.
In the years since, it has grown into a site with over 70 million unique daily visitors and devoted fans who take to its 100,000 communities called ‘subreddits’ to discuss an endless array of eclectic topics.
CEO and co-founder Steve Huffman (pictured, middle) visited Wall Street Thursday morning
The company’s debut also sets the stage for other companies looking to go public this year, while also testing investor appetite for new areas.
It is the first time a major social media company has gone public since Pinterest’s debut in 2019.
Alongside its quirky content, Reddit is also famous for the ‘meme stock’ saga of 2021.
This was when a group of retail investors on subreddit ‘Wall Street Bets’ collaborated to buy shares of highly shorted companies like GameStop and AMC.
In a nod to Redditors, the company reserved 8 percent of the shares on offer for eligible users and moderators, certain board members, and friends and family members of its employees and directors.
Some so-called ‘Redditors’ had complained the San Francisco-based company is selling out to Wall Street by going public (Pictured: The New York Stock Exchange Thursday)
Pedestrians pass a GameStop store on 14th Street at Union Square in Manhattan on Jan. 28. The GameStop saga has been portrayed by some as a victory of the little guy over Wall Street giants
But analysts warned that this was a risky move which lends itself to volatility.
Typically shut out of bidding in an IPO, retail traders eager to gain exposure to a newly listed company buy shares only when they start trading, which could lead to a first day run up and then a drop.
‘Because this has such a rabid community around it, the Reddit users, you could see Reddit itself ironically become a meme stock the way that you saw happen with like AMC and GameStop,’ Headline venture partner Kamran Ansari told Yahoo Finance.
But the frenzy for technology stocks might help Reddit get a good start, said Josh White, assistant professor of finance at Vanderbilt University.
‘We don’t get many large tech IPOs. Those tend to be very popular because it’s hard to buy that kind of growth,’ he said.
But despite its cult-like status in the social media world, the company has failed to replicate the success of rivals Meta and X.
The company has said it was ‘in the early stages of monetizing (its) business’ and is yet to turn an annual profit.
Investors will be analyzing whether there is a path to profitability.
‘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,’ Reena Aggarwal, director of the Georgetown University Psaros Center for Financial Markets and Policy, told Reuters.