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The stock price started at $47 and peaked at $57.80. At Thursday’s peak, the company’s market capitalization was about $10.9 billion. Reddit shares then fell to $48.64 about 30 minutes into trading, giving the company a market capitalization of about $7.9 billion.
Reddit, which trades under the ticker symbol RDDT, is testing investor appetite for new tech stocks after a long IPO drought. Since the peak of the tech boom in late 2021, few venture-backed tech companies have gone public, leaving companies like Instacart and Klaviyo underwhelming last year. On Wednesday, data center hardware company Astera Labs listed on the Nasdaq, sending its stock price soaring 72%, highlighting investor excitement about businesses tied to the artificial intelligence boom.
At its IPO price, Reddit’s valuation was around $6.5 billion, well below the company’s private market valuation of $10 billion in 2021, a boom year for the tech industry. The mood changed in 2022, as rising interest rates and soaring inflation drove investors out of risky assets. Startups responded by cutting jobs, lowering valuations and shifting their focus to profits rather than growth.
Reddit’s annual revenue for 2023 was $804 million, up 20% from $666.7 million a year ago, the company detailed in its prospectus. The company posted a net loss of $90.8 million last year, narrower than the $158.6 million loss in 2022.
Based on the past four quarters of earnings, Reddit’s price-to-sales ratio at the time of its IPO was approximately 8x. Alphabet is at 6.1x revenue, Meta is at 9.7x, Pinterest is at 7.5x, and Snap is at 10x. According to FactSet, sales are 3.9 times higher.
In addition to these companies, Reddit also counts X, Discord, Wikipedia, and Amazon’s Twitch streaming service as competitors in its prospectus.
Reddit is betting on the potential for data licensing to become a major source of revenue, saying in a filing that it has entered into “certain data licensing agreements totaling $203 million and terms ranging from two to three years.” Ta. This year, Reddit said it expects to recognize approximately $66.4 million in revenue as part of its data licensing agreement.
Google also signed an expanded partnership with Reddit, giving the search giant more access to Reddit data to train AI models and improve its products.
Reddit announced on March 15 that the Federal Trade Commission is conducting a private investigation “focusing on the sale, licensing, or sharing with third parties of user-generated content to train AI models.” It revealed that. Reddit says the FTC’s interest in its data licensing practices related to AI is “not surprising” and does not believe the company has “engaged in unfair or deceptive trade practices.” said.
Reddit was founded in 2005 by technology entrepreneur Alexis Ohanian and company CEO Steve Huffman. Existing shareholders, including Mr. Huffman, sold a combined 6.7 million shares in the IPO.
As part of the IPO, Reddit gave some of its top moderators and users, known as Redditors, the opportunity to purchase stock through its Directed Equity program. Companies like Airbnb, Doximity, and Rivian use similar programs to reward power users and customers.
“I hope they believe in Reddit and support Reddit,” Huffman said in an interview with CNBC on Thursday. “But the goal is just to get them into the trade, just like a professional investor.”
Reddit users have expressed skepticism about the IPO, citing both the company’s financial health and its often troubled relationships with moderators. Huffman said he recognizes that reality and credited WallStreetBets, the controversial subreddit that spawned the boom in meme stocks like GameStop.
“The great thing about Reddit is that it tells it like it is,” Huffman said. “But you have to remember that they’re doing it on Reddit. It’s a platform they love and it’s their home on the internet.”
OpenAI CEO Sam Altman is one of Reddit’s largest shareholders, along with Tencent and Advance Magazine Publishers, the parent company of publishing giant Condé Nast. Mr. Altman’s stock in the company was worth more than $400 million before trading began. Altman led Reddit’s $50 million funding round in 2014 and served on its board of directors from 2015 to 2022.
clock: Investors are watching Reddit’s IPO ‘very closely.’
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