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Social media giant Reddit plans to launch an IPO on the New York Stock Exchange on Thursday under the ticker RDDT. The stock price is likely to be around $34 per share. Don Butler, his director of managing at Thomvest Ventures, joins Yahoo Finance to discuss his Reddit’s potential to exceed expectations and change the narrative so far in the IPO market.
Reddit’s status and recent AI moves could boost investors’ view of the stock, Butler says: “For Reddit in particular, it’s both a well-known consumer brand and the world’s first public offering. I think there’s something like a combination.”In effect, a kind of social network has been going on for several years. In addition to that, data revenue comes in from AI, so I think it’s an AI license. What we’re going to see are investors who think about this like, A different way to embrace the next wave of generative AI. ”
For more expert insights and the latest market trends, click here to watch the full episode of Yahoo Finance Live.
Editor’s note: This article was written by Nicholas Jacobino
video transcript
Sheena Smith: Investors are bracing for the year’s first big tech IPO, which is set to start trading any minute now. On Reddit, his mascot, Snoo, will appear on the screen, and is expected to start at the top. Well, that price was about $34 per share. This comes after Astera Labs’ stock price rose 72% in its listing yesterday. I would like to welcome Don Butler. He is Managing Director of Thomvest Ventures. Don, it’s nice to see you here. So we see the Reddit price at the higher end of that range. I am very excited about my first transaction. What do you think we’ll see today?
Don Butler: I — you know, I — I actually think we’ll see a similar kind of rally during the market. I think one of the things that we’ve found is that often a good IPO metric from a bank’s perspective is something like 10% on the first day. So when you look at the 17 issues yesterday, I think it’s a sign of investor interest in new issuance. But I also think, especially on Reddit, there’s kind of a combination of both with well-known consumer brands. One of the influxes into social networks is the first public offering in several years.
In addition to that, you also get a kind of data revenue from AI. So I think about AI licensing — and I think we’re going to see some investors look at this as a way to participate in the next wave of generative AI, outside of what they’ve done in the past. I’ve had it before. So far, we have companies like Nvidia, and they’ve done a great job, but I think this gives investors another opportunity to invest in next-generation technology.
Brad Smith: That’s right, Don. So there are a lot of companies that say they’re playing around and experimenting by putting some of their capital into research and development around generative AI, either for productivity or market-ready solutions. How can Reddit prove it on the streets over time?
Don Butler: good. If you remember, they announced that they had a licensing agreement with Google. The first year was about 60 million. And basically, they can use the data to train language models at scale. And I think what’s interesting is looking at training income.
One is, can we extend this to other areas? Can we build on revenue with other large language model developers? And two, will there be continuous training, similar to the way large-scale language models evolve? So subsequent models that are built will rely on data from there, such as data from Reddit. Do we need to somehow access the complete data set of previous models that existed, or can we build on existing learnings and go from there? ?
So I think it will become visible in the first year. I think they are, you know, one of the few companies that actually makes real revenue around generative AI. But will it continue and build next year and beyond? I think that’s going to be really interesting to see here.
Sheena Smith: Don, some of the volatility that we’re expecting because we’ve been offering stocks to some of our users here, are some of those concerns justified, or are the expectations that we’re going to see more of this volatility? Do you think that’s correct? Is that a bit of an exaggeration at this point?
Don Butler: You know, my own experience buying stocks. I worked for a company that offered a direct stock program, and in that case, I acquired the stock early as an employee of that company, not here. For ecosystem participants, in my experience, the people who benefit are the ones who have been with the company the longest, or in this case, have been posting on Reddit or moderating forums the longest. They tend to be people. period. And in fact, we tend to think they’re going to be more loyal to the platform.
I think we will see some volatility due to widespread investor demand. I think that will lead to great progress. Sure, some people may sell some stocks, but I don’t think it will be as much of a decline as others are suggesting – pretty dramatic. In my own experience, the people who understand the company best and contribute most to its long-term success tend to be the people I think it will be in the future. – Participate in the Direct Share Program.
Brad Smith: And — and, Don, when you think about Reddit as a company and how it defines itself compared to the companies that went public before it, Pinterest doesn’t want to be seen as a social media company. was. When Snap went public, it claimed to be a camera company.
Don Butler: got it. Yeah.
Brad Smith: How should the public evaluate Reddit as a company?
Don Butler: Well, that’s — that’s interesting. Actually, when I think of analog, I think of people like Pinterest. I mean, I think that’s actually pretty accurate. Here’s one example of why. That’s interesting. We used to invest heavily in the ad tech industry. So when I was considering his IPO, I reached out to a friend who still places ad inventory at consumer brands and asked him what the experience was like being an advertiser on Reddit. How does it compare to other brands?
Basically, it’s similar to buying on Pinterest or buying on highly engaged communities like Nextdoor, but at the same time, it’s not about performance. These days, it’s used by companies like Meta, Google, and Amazon. It’s a marketing machine.
Sheena Smith: Hmm, that’s really interesting. Don Butler, thank you so much for taking the time to join us. Again, we’re hoping to see Reddit’s first deal any minute now. Don – Don Butler, Managing Director of Thomvest Ventures.thank you
Don Butler: Thank you.
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