Traders upvoted Reddit’s IPO but can the buzzing social media platform earn its stripes as a public company now?
Table of Contents:
⦿ Reddit Surges in Public Market Kickoff
⦿ If Wall Street Bought, Should You?
⦿ Reddit Stacked Up Against Rivals
⦿ Ad Posts Looking Like User Posts?
⦿ Bottom Line
📍Reddit Surges in Public Market Kickoff
Reddit (ticker: RDDT) stepped into the public-market space this week with a flashy and splashy IPO (initial public offering) in New York that chalked up a 48% gain on its debut day. The listing was met with lots of cheer from Wall Street as it was the biggest one for a social media company since Pinterest hit exchanges in 2019.
Shares of Reddit surged to $47 out of the gate to make its first deals at a 38% premium to the company’s IPO price of $34 a share. Valuation soared to $9.5 billion by the end of the session when shares closed at just over $50 a pop.
Reddit’s listing day with the Snoo—the website’s official mascot. Source: Reddit.
By the looks of it, investors upvoted Reddit—a chat-room powerhouse and a stalwart of community-based culture venues sprawling from cat-praising r/CatsInSinks and owl-loving r/Superbowl to the intimidating trading hub r/wallstreetbets that bankrupted GameStop short-seller Melvin Capital.
📍If Wall Street Bought, Should You?
So the question is, if Wall Street scooped up Reddit shares… should you?
Let’s take a behind-the-curtain look at Reddit’s business model.
It’s been three years of trying for Reddit to get listed on the New York Stock Exchange. Finally, it issued 22 million shares for flotation, of which 8%—or 1.8 million—were reserved for friends, family and volunteer moderators. Those are unpaid users who make sure all the online communities are running smoothly. And they are also the content creators, because—unlike Netflix (ticker: NFLX) or Spotify (ticker: SPOT)—Reddit doesn’t pay for its content.
The platform boasts roughly 73 million daily active users spread across 100,000 online chat rooms, or “subreddits.” Despite the wide reach and 19 years of existence, the platform has never seen what a profitable year looks like.
Its revenue comes predominantly from selling ads to companies who paid $804 million last year while the bottom line arrived at a $91 million loss. The revenue figure was a 20% increase from the $668 million picked up in 2022.
📍Reddit Stacked Up Against Rivals
And while revenue growth can be seen along the years, investors are betting that Reddit will ultimately catch up to the big shots in the social-media space. When Meta (ticker: META), formerly Facebook, kicked off its public endeavors in 2012, it soaked up a market value of $104 billion and raised $ $16 billion for its IPO. Elon Musk’s X Corp, formerly Twitter, landed its first public deals at a $14 billion valuation, having raised $1.8 billion. In comparison, Reddit raised $748 million at an IPO valuation of $6.4 billion.
Reddit carries the lowest valuation at IPO among social media peers.
📍Ad Posts Looking Like User Posts?
Against that backdrop, Reddit is taking a sketchy approach to bolstering its ad sales. Apparently, the folks at the upper echelons of the company decided it’s a good idea to make ad posts look exactly like user posts. The so-called “free form ads”, the company said, will mimic the popular user post type “megathread” and will “encourage users to deep dive into the topic at hand.”
The community, on the other hand, didn’t show much love to that new advertising strategy. “Enable comments on ads, you cowards,” said one Reddit user while related threads were loaded with users’ comments of disapproval.
📍Bottom Line
And there you have it, 19 years of posts, 100,000 subreddits, and 73 million users who churn out all the content and self-sustain operations. Reddit gave us the meme stock craze back in 2021. Is it going to give us a rerun of the stock frenzy with its own shares this time? Or will the folks at r/wallstreetbets flip the script and short it?
💬 Let us know your thoughts in the comment section below!
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Table of Contents:
⦿ Reddit Surges in Public Market Kickoff
⦿ If Wall Street Bought, Should You?
⦿ Reddit Stacked Up Against Rivals
⦿ Ad Posts Looking Like User Posts?
⦿ Bottom Line
📍Reddit Surges in Public Market Kickoff
Reddit (ticker: RDDT) stepped into the public-market space this week with a flashy and splashy IPO (initial public offering) in New York that chalked up a 48% gain on its debut day. The listing was met with lots of cheer from Wall Street as it was the biggest one for a social media company since Pinterest hit exchanges in 2019.
Shares of Reddit surged to $47 out of the gate to make its first deals at a 38% premium to the company’s IPO price of $34 a share. Valuation soared to $9.5 billion by the end of the session when shares closed at just over $50 a pop.
By the looks of it, investors upvoted Reddit—a chat-room powerhouse and a stalwart of community-based culture venues sprawling from cat-praising r/CatsInSinks and owl-loving r/Superbowl to the intimidating trading hub r/wallstreetbets that bankrupted GameStop short-seller Melvin Capital.
📍If Wall Street Bought, Should You?
So the question is, if Wall Street scooped up Reddit shares… should you?
Let’s take a behind-the-curtain look at Reddit’s business model.
It’s been three years of trying for Reddit to get listed on the New York Stock Exchange. Finally, it issued 22 million shares for flotation, of which 8%—or 1.8 million—were reserved for friends, family and volunteer moderators. Those are unpaid users who make sure all the online communities are running smoothly. And they are also the content creators, because—unlike Netflix (ticker: NFLX) or Spotify (ticker: SPOT)—Reddit doesn’t pay for its content.
The platform boasts roughly 73 million daily active users spread across 100,000 online chat rooms, or “subreddits.” Despite the wide reach and 19 years of existence, the platform has never seen what a profitable year looks like.
Its revenue comes predominantly from selling ads to companies who paid $804 million last year while the bottom line arrived at a $91 million loss. The revenue figure was a 20% increase from the $668 million picked up in 2022.
📍Reddit Stacked Up Against Rivals
And while revenue growth can be seen along the years, investors are betting that Reddit will ultimately catch up to the big shots in the social-media space. When Meta (ticker: META), formerly Facebook, kicked off its public endeavors in 2012, it soaked up a market value of $104 billion and raised $ $16 billion for its IPO. Elon Musk’s X Corp, formerly Twitter, landed its first public deals at a $14 billion valuation, having raised $1.8 billion. In comparison, Reddit raised $748 million at an IPO valuation of $6.4 billion.
📍Ad Posts Looking Like User Posts?
Against that backdrop, Reddit is taking a sketchy approach to bolstering its ad sales. Apparently, the folks at the upper echelons of the company decided it’s a good idea to make ad posts look exactly like user posts. The so-called “free form ads”, the company said, will mimic the popular user post type “megathread” and will “encourage users to deep dive into the topic at hand.”
The community, on the other hand, didn’t show much love to that new advertising strategy. “Enable comments on ads, you cowards,” said one Reddit user while related threads were loaded with users’ comments of disapproval.
📍Bottom Line
And there you have it, 19 years of posts, 100,000 subreddits, and 73 million users who churn out all the content and self-sustain operations. Reddit gave us the meme stock craze back in 2021. Is it going to give us a rerun of the stock frenzy with its own shares this time? Or will the folks at r/wallstreetbets flip the script and short it?
💬 Let us know your thoughts in the comment section below!
Don't want to miss any of our articles and be notified when a new one is released? Give us a follow!
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