Reddit Makes High-Stakes Stock Market Debut, Testing Investor Appetite

Reddit, the popular social media platform based in San Francisco, California, made its high-profile market debut on the New York Stock Exchange, pricing its initial public offering at the top end of the range at $34 per share.

The IPO valued Reddit at $6.4 billion, raising $748 million for the company and its selling shareholders, setting the stage for a significant test of investor appetite for upcoming public offerings.

Reddit’s journey to becoming a publicly traded company has been in progress for more than two years, with a confidential IPO filing in Dec. 2021, delayed due to stock market volatility linked to the Federal Reserve’s quantitative tightening.

The market debut is crucial not just for Reddit but also for the broader IPO market, as a successful or challenging performance by Reddit could impact other companies planning to go public in the near future.

During the “meme-stock” frenzy of 2021, Reddit’s platform gained immense popularity as retail investors congregated on the “wallstreetbets” forum to collectively invest in highly shorted companies like GameStop.

To engage its user base, Reddit reserved 8% of the IPO shares for eligible users, moderators, certain board members, and friends and family of employees and directors.

In a unique move, Reddit also offered shares to retail investors through platforms like Robinhood, SoFi, Morgan Stanley Wealth Management, and Fidelity Brokerage Services, potentially leading to increased demand and market volatility.

Despite its cult-like status in the social media realm, Reddit faces challenges in profitability, unlike its larger rivals such as Meta Platforms‘ Facebook and Elon Musk‘s ventures.

The company has emphasized it is still in the early stages of monetization, with a focus on ramping up ad sales and exploring new avenues like content licensing and e-commerce partnerships to increase revenue.

Leadership stability has also been a point of concern, with co-founders Steve Huffman and Alexis Ohanian experiencing tumultuous tenures at Reddit, including management changes and user backlash events.

As Reddit steps into the public market, all eyes will be on its performance post-IPO, with investors eagerly waiting to see the company’s roadmap to profitability and its ability to navigate the competitive social media landscape.