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In an interview on the New York Stock Exchange floor ahead of Reddit's trading debut on Thursday, CEO Steve Huffman admitted that the mischievous retail investors congregating on the social media platform may be intentionally driving down the stock price.
“It's a free market!” he said.
For Reddit, as for Huffman, the bet on a public offering of a site he described as a “fun and special, but sometimes crazy place” seemed to be paying off.
Shares of the social media company jumped in their stock market debut under the ticker symbol RDDT, closing at $50.44, 48 percent above the IPO price. This increased its fully diluted market cap to $9.5 billion, close to where the company was last privately valued in 2021 at $10 billion.
Reddit's journey to public markets marks a turning point for a marginal, free-speech-focused platform dominated by esoteric memes, sardonic humor and gamers, as it transforms into a mainstream discussion center that enforces stricter moderation rules to attract advertising dollars .
For previous investors, the picture was mixed. A big winner was the Newhouse family, which owns Condé Nast through Advance Magazine Publishers Inc, which bought Reddit for $10 million in 2006 before spinning it off in 2011. Its shares are now worth about $2.1 billion, a hefty gain for their publishing empire. This also includes Vanity Fair, The New Yorker and Vogue. Companies linked to OpenAI CEO Sam Altman now own a stake worth $613 million.
But investors who put up $61.79 per share in the last funding round in 2010, such as Fidelity, saw a little less consideration in this particular investment.
Founded in 2005, the self-proclaimed “front page of the Internet” has struggled through management upheavals and moderation scandals and grown to 73 million daily users across its 100,000 communities, or “subreddits,” in Reddit parlance. However, it is compared to meta or
Nevertheless, the IPO attracted institutional interest. Demand is strong and the deal's two dozen largest investors, who received the majority of shares, are typically large money managers who intend to hold the stock for the long term, a person familiar with the matter said.
Reddit's rise on its first day of trading, a day after AI infrastructure company Astera Labs soared 72 percent in its Nasdaq debut, also signals an acknowledgment of public investor demand for listings – even for an unprofitable company like Reddit.
“Overall, this is a very positive development for the IPO markets [and] should bode well for many of the pre-IPO companies in the queue,” said Christian Munafo, chief investment officer of Liberty Street Advisors.
But, Munafo said, “while [Reddit] If the stock has performed well to begin with, it could come under pressure unless it can show better growth and monetization.”
In any case, the deal is a blessing for Huffman. The CEO sold 500,000 of his shares during the IPO and paid out a whopping $17 million. He is expected to receive more stock awards as the company lists at a valuation of over $5 billion. He also received an estimated $193 million in pay package last year, most of which consisted of stock awards, according to the filing.
Historically, Huffman's leadership style has reflected the style of Reddit's restive user base. The self-confessed “internet troll” was initially concerned about policing the more extreme communities on the platform and relying on those groups to set their own rules and moderate themselves. He has defended and cheered on Reddit's WallStreetBets trading forum, which rose to mainstream notoriety when members collectively shorted so-called meme stocks to pressure hedge funds.
But Huffman has recently been forced to clean up the platform's darker underbelly for advertisers, present a more professional facade to Wall Street and pursue more profit. As a result, Reddit has shifted its ambitions slightly to align its fortunes with broader technology trends. When Reddit first filed for an IPO in 2021, AI was mentioned once in its prospectus. In the 2024 version, AI appeared more than 60 times.
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Still, this approach has put Huffman and the company at odds with some Reddit communities that have resisted changes to the platform. With new pressures to enter public markets, some analysts warn that Reddit's character could be destroyed and users may seek alternatives, which could negatively impact the company.
“Reddit, more than many other social media platforms, is a very community-based, non-commercial space and people know and love it [this]said Samuel Woolley, a propaganda expert and assistant professor at the University of Texas at Austin.
“I think the big question that should concern Reddit is to what extent the IPO will change the nature and structure of the platform.”
Additional reporting by Nicholas Megaw in New York
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