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In an interview with the New York Stock Exchange ahead of Reddit’s board meeting on Thursday, CEO Steve Huffman claimed that mischievous retail investors congregating on the social media platform can intentionally drive down its stock price.
“It’s a sluggish market!” He said.
For Reddit, as for Huffman, the gamble of an IPO of a site it describes as a “fun and special, albeit crazy, place” has paid off.
Shares of the social media company soared on its Big Board debut under the ticker symbol RDDT, ending at $50. 44, 48% above its IPO price. This brought its fully diluted market capitalization to $9. 5 billion, close to where the company last privately valued at $10. billion in 2021.
Reddit’s foray into public markets marks a turning point for a free-speech-focused fringe platform governed through esoteric memes, sardonic humor, and gamers, as it morphs into a more conventional discussion hub that imposes stricter moderation regulations to attract advertising. Dollars. .
The track record of its early investors is mixed. One of the big winners is the Newhouse family, which, through Advance Magazine Publishers Inc. , owns Condé Nast, which bought Reddit in 2006 for $10 million before spinning it off in 2011. His stock is now worth about $2. 1 billion, a boon to his publishing empire, which also includes Vanity Fair, The New Yorker and Vogue. Entities affiliated with OpenAI’s lead executive, Sam Altman, now hold a stake valued at $613 million.
But investors who invested in the last investment circular of 2021 at $61. 79 per share, such as Fidelity, were looking for a lower investment.
Founded in 2005, the self-proclaimed “first page of the internet” has battled control turmoil and moderation scandals to reach 73 million users in its 100,000 communities, or “subreddits,” as Reddit puts it. However, it is a social network. minnow compared to Meta or X, which have more than 2. 1 billion and 245 million active users, respectively.
Still, its initial public offering has piqued interest from institutional investors. Demand was strong and the two dozen giant investors in the deal, who won the majority of the shares, were giant asset managers aiming to hold the stock for the long term, according to a user familiar with the matter. with the subject said.
Reddit’s surge on its first day of trading, a day after artificial intelligence infrastructure organization Astera Labs surged 72% in its Nasdaq debut, also indicates a validation of public investors’ call to go public, even from an unprofitable company like Reddit.
“Overall, this is a very positive progression for IPO markets [and] bodes well for many pre-IPO corporations that are in the queue,” said Christian Munafo, chief investment officer at Liberty Street Advisors.
But, Munafo said, “while [Reddit] performed well from the start, inventory may be under pressure unless it demonstrates further expansion and monetization. “
The CEO sold 500,000 of his inventories in the IPO, cashing in a whopping $17 million, and is expected to get more inventory allocations after the company’s board surpasses a $5 billion valuation. An estimated $193 million was reimbursed last year, mostly made up of inventory awards, according to filings.
Historically, Huffman’s taste as a leader mirrors that of Reddit’s rebellious user base. The self-confessed “internet troll” was first bothered by the concept of controlling as many extremist communities hosted on the platform as possible, relying on those teams to create their own regulations and self-moderate. He defended and encouraged Reddit’s WallStreetBets trading forum, which rose to prominence when its members jointly bought so-called meme stocks in an effort to diminish hedge funds.
But Huffman has recently been forced to hide the darker aspects of the platform from advertisers, offer a more professional façade to Wall Street and pursue greater profitability. As a result, Reddit has shifted its ambitions to concentrate its fortunes on broader tech trends. Filed for its first initial public offering in 2021, AI was mentioned once in its prospectus. In the 2024 version, AI has given the impression more than 60 times.
Still, this technique has put Huffman and the company at odds with some Reddit communities, who have been reluctant to make changes to the platform. In the face of new pressures as it enters the public markets, some analysts warn that Reddit’s character could simply be destroyed. And users can simply look for alternatives, to the detriment of the company.
“Reddit, more than many social media platforms, is a non-commercial, very community-driven space and people know it and love it for it,” said Samuel Woolley, a propaganda expert and assistant professor at the University of Texas. in Austin.
“I think the big question we all have on Reddit is to what extent is an IPO going to replace the very nature and structure of the platform. “
Additional information via Nicholas Megaw in New York.
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