Reddit, the self-proclaimed “front page of the internet,” is making its debut on Wall Street
Reddit mascot Snoo rings the opening bell of the New York Stock Exchange ahead of the company's IPO on Thursday. Yuki Iwamura/Associated Press
NEW YORK – Reddit shares jumped in their Wall Street debut as investors boosted the company's value to nearly $9 billion seconds after trading began on the New York Stock Exchange.
Reddit, which had priced its IPO at $34 per share, debuted at $47 per share on Thursday afternoon. At the close, it was up 48% at $50.44, off a high of $57.80.
“This volatility is not surprising as Reddit has attracted a lot of attention,” said Reena Aggarwal, director of the Psaros Center for Financial Markets and Policy at Georgetown University.
When Reddit's price initially shot up, Aggarwal explains, some investors who had received an allocation may have sold their shares to take advantage of the gains, driving the price back down. She pointed out that this could remain the case even in the early days of the stock.
Reddit's IPO will test the quirky company's ability to overcome a nearly 20-year history marked by continuous losses, management turmoil and user backlash to build a sustainable business.
Much of Reddit's interest comes from a large audience who regularly visit the site to discuss a potpourri of topics ranging from silly memes to existential concerns, and to get recommendations from like-minded people.
About 76 million users logged into one of Reddit's roughly 100,000 communities as of December, according to regulatory disclosures required before the San Francisco company's IPO. Reddit has reserved up to 1.76 million of the 15.3 million shares offered in the IPO for users of its service.
In keeping with usual IPO custom, the remaining shares are expected to be bought mostly by mutual funds and other institutional investors betting that Reddit is ready for prime time in the financial space.
Reddit's money-making potential has also attracted some prominent backers, including OpenAI CEO Sam Altman, who was an early investor and amassed a stake that made him one of the company's largest shareholders. According to the company's IPO filings, Altman owns 12.2 million Reddit shares.
By tech industry standards, Reddit remains extraordinarily small for a company that has been around for so long. Thursday's opening valuation of $9 billion, for example, is still well below the $1.2 trillion market value reported by Meta Platforms – whose largest social media service, Facebook, launched just 18 months earlier than Reddit.
Reddit never capitalized on its wide reach while amassing $717 million in losses. That number has risen from cumulative losses of $467 million in December 2021, when the company first filed papers to go public before abandoning that attempt.
In recent filings for its revived IPO, Reddit attributed the losses to a relatively new focus on finding new ways to boost revenue.
Shortly after its founding, Reddit was sold to magazine publisher Conde Nast for $10 million, meaning the company didn't have to operate as a standalone company. Even after Conde Nast's parent company, Advance Magazine Publishers, spun off Reddit in 2011, the company said in its IPO filing that it did not focus on generating revenue until 2018.
These efforts, largely focused on selling ads, have helped the social platform grow its annual revenue from $229 million in 2020 to $804 million last year. But the San Francisco-based company also posted total losses of $436 million from 2020 to 2023.
Reddit outlined a strategy in its filing that calls for even more ad sales on a service that it believes will be a powerful marketing magnet for companies because so many people look there for product recommendations.
The company also hopes to make more money by licensing access to its content, similar to the $60 million Google recently closed to help train its artificial intelligence models. However, this ambition faced an almost immediate challenge when the US Federal Trade Commission opened an investigation into the agreement.
With Reddit hitting the public markets for the first time on Thursday, Aggarwal emphasized that the first key indicator of success will come down to the company's next earnings release.
“As a public company, they now have to report a lot more… in the next earnings release,” she said. “I’m sure the market will be watching this closely.”
Reddit has also experienced turbulent periods of instability in leadership that could deter potential investors. The company's co-founders, Steve Huffman and Alexis Ohanian – also the husband of tennis superstar Serena Williams – both left Reddit in 2009, when Conde Nast was still in control, only to return years later.
Huffman, 40, is now CEO. Although it was not mentioned in its founder's letter leading up to this IPO, Huffman addressed the company's past turmoil in another letter that was included in a December 2021 filing attempt that was subsequently canceled.
“We have lived these challenges publicly and have the scars, insights and policy updates to prove it,” Huffman wrote at the time. “Our history influences our future. There will undoubtedly be further challenges ahead.”
Liedtke reported from San Francisco.
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