Despite Past Challenges, Reddit's IPO Attracting Investors Reddit's IPO Soars to $9B Within Seconds of NYSE Debut . Credit: techxplore.com

Reddit's stocks skyrocketed during its debut on Wall Street, with investors pushing the company's value close to $9 billion within seconds of its trading on the New York Stock Exchange. The company, which had an initial public offering (IPO) price of $34 a share, opened at $47 a share on Thursday afternoon. The stock price continued to climb, reaching over 40% by 2:30 p.m. ET.

The success of Reddit's IPO will test the company's ability to overcome a tumultuous history, including continuous losses, management changes, and user backlash, in order to establish a sustainable business model. However, according to industry experts, the high demand and limited supply of Reddit's shares make it a hot IPO.

Some experts predict that the stock may be volatile, with some investors selling their shares for a quick profit, potentially causing the price to fluctuate. Despite this, the company's large and dedicated user base, with an estimated 76 million users in December 2021, has attracted attention from investors.

As part of the IPO, Reddit reserved up to 1.76 million shares for its users, with the remaining shares expected to be purchased by institutional investors. The company's potential for profitability has also caught the attention of prominent supporters, such as OpenAI CEO Sam Altman, who holds a significant share in Reddit.

Compared to other tech companies, Reddit is relatively small, with a market value of $9 billion on its first day of trading, compared to Meta Platforms' $1.2 trillion. Despite this, Reddit has never turned a profit and has accumulated losses of $717 million.

The company has only recently begun focusing on revenue generation, primarily through advertising. This has resulted in an increase in annual revenue from $229 million in 2020 to $804 million in 2021. However, Reddit has also posted consecutive losses of $436 million from 2020 to 2023.

In its IPO filing, Reddit outlined plans to increase revenue through advertising and licensing deals, such as a recent $60 million deal with Google. However, the company's ambitions faced a setback when the U.S. Federal Trade Commission opened an inquiry into the deal.

With Reddit's first day on the public market, experts believe that the company's next earnings call will be a key measure of its success. The company has also faced leadership changes in the past, with co-founders Steve Huffman and Alexis Ohanian leaving in 2009 and returning years later. Despite past challenges, Reddit's CEO Huffman remains optimistic, stating in a founder's letter that "our history influences our future."

Alton Shaffer
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