shares rose 48% in New York on their first day of trading, suggesting investor interest in promising but loss-making companies' IPOs may be returning.
Reddit, which hasn't made a profit since 2005, attracted investors by promoting its material as AI training. Last month, Reuters claimed that Reddit and Google signed a $60 million-a-year data licensing contract.
In its IPO marketing roadshow, Reddit emphasized AI as a growth area, even though advertising still generates most of its revenue. It also revealed last week that the FTC is investigating its AI data licensing deals.
We are a growth company. Reddit COO Jen Wong said growing users and community is key to achieving our mission. San Francisco-based firm shares began at $47 on the New York Stock Exchange on Thursday after pricing at $34 in the IPO, the top of its suggested price range. They closed at $50.44.
Reddit collected $748 million from its selling shares in an IPO worth $6.4 billion. Reddit was valued at $10 billion in a private funding round in 2021, and its favorable stock market reception suggested that it may not have required to lower its valuation forecasts to launch the IPO.
Reddit's public market debut was long overdue. It confidentially filed for an IPO in December 2021, but a stock meltdown caused by Russia's crisis in Ukraine and the Fed's interest rate hike froze the IPO market and delayed it. Josh White, Vanderbilt University assistant professor of finance, said Reddit's IPO indicated investors were ready to accept the company's losses for its future development, a trend not seen in three years.
We rarely see major tech IPOs. Buying that type of growth is hard, thus those are popular "White stated.Reddit's popularity soared during the 2021 "meme-stock" fiasco, in which retail investors used "wallstreetbets" to acquire shares of severely shorted businesses including GameStop .
In order to reward users, Reddit has reserved 8% of the shares for eligible users, moderators, board members, and friends and family of workers and directors. Online trading platforms Robinhood (HOOD.O) and SoFi (SOFI.O) issued some shares to regular customers. Fidelity Brokerage and Morgan Stanley Wealth Management.
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