Reddit Inc’s initial public offering on the New York Stock Exchange continues to draw focus, as investors await to see where shares will go from a starting price of US$34 on Thursday’s first day of trading.
In the absence of any market data just yet, commentators noted an early 1.8% rise by The Renaissance IPO ETF, which tracks the largest newly US-listed firms, in early trading.
Reddit priced the IPO at the top end of its initially guided range, with weekend reports saying the offering was as much as five times oversubscribed.
Focus has been on the IPO for several reasons, not least as observers wait to see if Reddit itself becomes a meme stock, given its own role in hosting users that played an integral part in the 2021 frenzy that sent the likes of GameStop Corp (NYSE:GME) skyward.
Eyes also remain fixed on the offering in order to gauge wider sentiment around the IPO market though, which has been dampened in recent years.
"If Reddit trades poorly, it will cast a shadow over the IPO market,” Accelerate Financial Technologies boss Julian Klymochko noted, “many companies will hit pause on their IPO initiatives”.
For Reddit, an initial price of US$34 per share gives it a fully diluted valuation of US$6.4 billion, with the company itself having raised US$519 million from the offering.
Where Reddit goes from the IPO then poses questions, analysts said, especially given the social media’s repeated loss-making years since its launch in 2005.
Given such challenges in monetizing its growing user base, which averaged around 850 million in each month of last year, so far, Hargreaves Lansdown’s Susannah Streeter said opportunities could lie within the increasing adoption of artificial intelligence.
“The real potential is likely to come from making the most of its vast store of data in the form of a deep well of conversations on the site,” she noted on Thursday.
“This could be harvested by AI models, and in its prospectus the company revealed it’s already been licensing some data.”
What makes this all the more possible is the fact OpenAI chief executive Sam Altman sits among Reddit’s key investors, she added, holding a 9.2% stake.
Proceeds from the IPO will likely allow Reddit to set about such plans therefore, as per Streeter, and ultimately pursue profitability and further growth.