Reddit Inc., the 19-year-old social media platform, founded by Steve Huffman, CEO, and Aaron Swartz and Alexis Ohanian, witnessed a momentous occasion with its Initial Public Offering (IPO). Shares in Reddit Inc. (RDDT) soared 62% above the $34 IPO price, opening at $55 in early trades.
The IPO was unique in its approach, as it welcomed not only institutional investors but also retail investors. Around 2 million of the 159 million shares available were reserved for retail investors, in an effort by Huffman to “level the playing field”.
As Huffman noted, “The best investors of Reddit are people who use Reddit.”
One speculative inquiry in the subreddit r/RedditIPO pondered the share price needed for a $10 billion market cap, a figure that was swiftly achieved as shares hit $55, propelling the company’s valuation from $6.4 billion at IPO to $10 billion.
Anticipation preceding the debut was high, with Reddit stock trading at $55 in pre-market exchanges, mirroring the opening price. Speculation swirled that Reddit might become a meme stock, reminiscent of the frenzy observed with Gamestop and AMC earlier in 2021.
On social media, reactions were mixed. Susan Li from CNBC quipped, “Only during a 2-year IPO drought does a $6 billion company that’s been unprofitable for 20 years garner this much attention.”
Adam Taggart of Thoughtful Money echoed similar sentiments, questioning Reddit’s sustainability in the long run amidst the AI craze. Thomas Smale, CEO of FE International, expressed doubts about Reddit’s profitability and longevity, citing the lack of a proven business model.
In an email to Benzinga, Smale remarked, “With tighter liquidity and higher capital costs, investors increasingly value companies with strong fundamentals and clear paths to profitability – an area where Reddit currently falls short.”
Despite the excitement surrounding Reddit’s IPO, concerns loom over its ability to generate consistent profits in the future, raising doubts among investors about its long-term viability in the competitive tech landscape.
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