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What happened? 

Social media company Reddit, has listed on the New York Stock Exchange (NYSE). The 19-year-old website, which hosts millions of online forums, priced its Initial Public Offering (IPO) on the higher end of its range, at $34 a share. 

Reddit, which is trading under the stock ticker “RDDT”, and selling shareholders raised around $700mn from the offering, with the company receiving about $519mn. 

Reddit shares increased 48% in the few days after their initial debut. 

More on the story 

The hotly anticipated IPO is the latest social media company to list on a stock market, since Pinterest did so in 2019. 

The company’s $6.4bn valuation is a drop from the $10bn valuation it was given in 2021. 

It reached a high of $57.80, which is a 70% increase at its peak for the day on the first day of trading. It closed at $50.44, which gave the company a market cap of about $9.5bn. 

8% of its shares were reserved for eligible site users and moderators. 

Reddit: A Quick Glance 

What? A social media company bringing together various types of communities and networks. 

Current Founder/s: Steve Huffman, Aaron Swartz, Alexis Ohanian on June 2005 

Current CEO: Steve Huffman 

Current share price: $47.56 (at the time of writing) 

What factors have led to this? 

• They want to reduce their yearly losses. Since its debut in 2005, the company has reported a net loss- each year, including losing $90.8mn in 2023. Not only do they want to reduce their annual losses, they also want to introduce new streams of income. One way they are doing so, is by enabling companies to train artificial intelligence models on Reddit users’ posts. For example, in February 2024, they struck a licensing deal with Google for this very reason. The contract is worth around $60mn yearly. Reddit has around 267 mn weekly average users and this has made it an attractive target for such companies to train and improve their AI tools and models. 

• It’s about time. Reddit filed for an IPO back in December 2021. However, it was delayed due the uncertain market conditions, such as high interest rates and inflation, and geopolitical conflicts. Even though its valuation was much higher then, the company is still set to have a valuation of more than $6.4bn, which will help the company massively. One cna even say, if they had waited further, the current valuation would have plummeted even more. The best time to go public is now, because as the last few years have taught us, the future is uncertain. 

Why do companies go public? 

Less requirements, less restrictions on trading and management...life can seem bliss for private companies. Companies who list on any stockmarket, are subject to stringent rules and requirements. Many things about the company, including its finances are laid out bare for stock exchanges to see. There are a number of reasons as to why a company may want to go public. Some of them include: 

• They want to raise capital. The listed company gets money from shareholders and investors, in exchange for giving out shares to the public. It helps such companies to raise lots of cash in a relatively short amount of space. It is easier to raise money without having the borrow (due to secondary stock offerings). Acquisitions become a lot easier for public companies too. 

• Some companies may want to increase their prestige. This can help to spread the word about the company and attract as well as retain better talent. The extra publicity that comes can also help them to reach new markets, which could increase their market share even further. 

What implications could this story have? 

For Reddit: Given the billions in valuation, the extra money can be ploughed back into the company, such as into their Research and Development department. It may help to make Reddit look more attractive, than they were previously too.  

Some Reddit users may not like where the social media company is heading. Now that shareholders are in the mix, Reddit could very well prioritise making more income for the shareholders, at the cost of the Reddit users. Some ways this could happen, is users may see more modifications to the social media platform. Another potential change could be increased advertising. Advertising is the primary way Reddit brings in revenue. If they want to make more money for the company (which I’m very sure they do), then this may very well be an option, to the annoyance of some loyal Reddit users. 

For investors:  

Investors buying up shares will be good for investors...assuming the company does well. The more investors, the better the valuation of Reddit and the higher the worth of their shares. They haven’t made any profit yet, it’s generally a difficult one to do for social media companies. The IPO could potentially help the company carve a path down to profitability. What’s important to remind ourselves, is that the company hasn’t been trading for long. The performance we have seen in the last few weeks, can be used as a signal for how the stock could do in both the medium and long term, but as we have witnessed these past few years, the stock market can be very volatile. So who knows how Reddit’s stock will do in the medium to long term.  

The popular subreddit community by the name of ‘WallStreetBets’ could cause some concerning to the company’s listing. Remember what happened to GameStop in 2021? Click here for more detail on what happened. What happened to GameStop and even Hertz, could happen to Reddit’s stock...on its own platform. Reddit stock became the focus of “meme mania”. The stock increased from just under $50 per share, to a high of around $74.90 per share, between 22-26th March. However, the wave died as quickly as it came. For example, the shares went through sharp declines during the last two trading days of March.  

For the IPO market: Some companies are viewing Reddit’s success (or not) as a way to test the waters in the IPO market. If Reddit does well, it could encourage other companies to go public, and startups to raise money- all of which boosts the domestic and global IPO market. If it doesn’t go as planned, the IPO market could continue to experience more dryness. Reddit’s stock has been trading for a few weeks now. Since the beginning of April, the stock seems to have been trading at a relatively stable price of between $45-$50 per share. Due to a range of factors, such as geopolitical instability, increases in inflation and inflation rates and more, the IPO market hasn’t been as active as it once was a few years ago.  

According to this YouTube video by CNBC, potential IPOs for 2024 include: SKIMS, Discord,, Shein, Klarna and Chime.  

Such companies will definitely be looking out for how Reddit's listing goes and may want to wait a few months to see how the stock does in the medium to long term. 

Closing thoughts: 

Reddit going public has been a long time coming. As with many companies who go public, the first few days of the stock trading (especially the first day), usually does relatively well. As things stand, the stock is doing alright. How the stock will fare in the future is anyone’s guess.  

What I do hope, is that the IPO market will rebound and Reddit may be the starting gun that could lead to this.   

That’s it for this week! What are your thoughts on the story? Do you think all will go well with Reddit’s float? Could it turn into a meme stock? Have they listed at the right time? You can comment below, send me a message on any of my social media pages or email me: hello@parahinsights.com. 

I look forward to hearing from you! 

Until next time, remember to stay curious! 

Useful resources: 

‘Reddit shares priced at $34 in largest IPO by social media company in years’-Article by The Guardian 

‘GameStop fun turns serious for Reddit’s WallStreetBets’-Article by The Guardian 

‘How to take a company public- Article by Tony Robbins 

‘Reddit nears IPO: Here’s what investors need to know- YouTube video by CNBC 

Reddit reveals IPO terms: Here’s what to know- YouTube video by CNBC 

Disclaimer: 

This blog is for informational purposes only. Parah Insights is not associated with the news sources in this blog, and sharing does not equal endorsement. Parah Insights does not provide financial, tax, legal or accounting advice – always consult your financial and legal advisors to determine what’s right for you and your business.