- Shares priced at $34 a share, top end of range
- $750 million raised from the IPO
- Reddit begins trading under ticker RDDT
After eyeing a New York listing since 2021, social media company Reddit (RDDT:NASDAQ) was finally granted its wish on 21 March.
The shares finished the day 48% higher than their IPO price of $34, giving the company a market cap of about $9.5 billion.
The website, which hosts millions of online forums, raised about $750 million from the offering with the company ‘collecting’ approximately $519 million.
DISAPPOINTING RESULTS
Reddit has come under fire for never recording a profit in its 19-year history.
The company recently reported disappointing results - a net loss of $90.8 million in 2023, however this loss was narrower than its loss of $158.6 million in 2022.
EXPERT VIEW
Dan Coatsworth, investment analyst at AJ Bell said: ‘Reddit’s successful IPO represents a return to pre-pandemic days when investors were happy to lap up shares in loss-making companies if they offered a compelling narrative. Having priced the IPO at the top end of the marketing range, Reddit’s shares have subsequently jumped as trading gets underway.
‘Why have its shares been a hit at IPO? A key reason is the link to artificial intelligence, a current hot investment theme. Reddit is seen as one of the engines that will feed AI models. Investors have a ferocious appetite to buy shares in anything linked to AI, as evident by the storming share price performance of names like Nvidia (NVDA:NASDAQ) and Meta Platforms (META:NASDAQ) over the past year or so.
‘Nvidia’s sales have soared thanks to demand for its chips that power AI. Meta has shown the benefits of using AI to serve up videos that keep users engaged and exposed to more third-party promotions, thus raking in more advertising dollars. That’s led investors to speculate Reddit could also get a slice of the AI pie.
‘Consumers are talking about all kinds of topics, themes, and products, offering advice, and sharing their experience and knowledge. This information is incredibly valuable, and Reddit has begun to licence this content to third parties. Whether users are comfortable that Reddit is making money off their contributions is another thing – it presents a risk that people stop using the social media network in the long term.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Sabuhi Gard) and the editor (Martin Gamble) own shares in AJ Bell.
