(Updated with Reddit’s debut on the NYSE on Thursday afternoon, March 21, 2024)
Reddit(RDDT) shares surged to close at $50.44 – up $16.44 from their IPO price for a gain of 48.35 percent – in their New York Stock Exchange debut today (Thursday, March 21, 2024) on volume of about 47.75 million shares. Reddit opened at $47.00 – up $13.00 from its IPO price of $34.00 – after 1 p.m. EDT today and kept on going. Shares of Reddit hit an intraday high at $57.80 – up $23.80 for a 70 percent gain from the $34.00 IPO price.
Reddit(RDDT) priced its IPO at $34.00 – the high end of its $31.00-to-$34.00 range – and sold 22.0 million shares – the number in the prospectus – to raise $748.0 million on Wednesday night, March 20, 2024).
At pricing, Reddit had a market cap or a valuation of $5.41 billion, based on its outstanding stock at the IPO’s pricing, the prospectus shows. Bloomberg pointed out: “Including stock options and restricted share units, Reddit’s fully diluted valuation is closer to $6.4 billion.”.
Morgan Stanley, Goldman Sachs, J.P. Morgan, BofA Securities, Citigroup, Deutsche Bank Securities and MUFG are the joint book-runners.
The iconic social media company’s IPO is the first big tech IPO of the year. Founded in 2005 in a University of Virginia dorm room, Reddit has not made a profit in 19 years.
Reddit’s road to going public included some speed bumps in just the past few days.
Early Tuesday morning, March 19, 2024, Reddit disclosed in an SEC filing that it had received a letter from Nokia alleging that Reddit has infringed some of Nokia’s patents.
“They’re getting sued on AI patent infringement, they paid their CEO $193 million last year, and they lost $90 million last year,” a veteran IPO trader says, ticking off the reasons why he slashed his indication for Reddit to a sliver.
On Friday, March 15, 2024, after the closing bell, Reddit disclosed that the FTC has launched an inquiry into Reddit’s licensing of user data to AI companies, according to an S-1/A filing.
Reuters reported last month thatReddit reached a $60 million-a-year deal with Google to make Reddit’s “content available for training the search engine giant’s artificial intelligence models, three people familiar with the matter said.”
Reddit co-founder and CEO Steve Huffman earned $193.25 million in 2023 – more than twice the amount of Reddit’s net loss of $90.8 million for the year.
Of the 22.0 million shares in the IPO, Reddit offered 15.28 million shares and the selling stockholders sold 6.72 million shares, the prospectus said.
Reddit’s total IPO proceeds are estimated at $519.52 million, based on the IPO price of $34.00.
Redditors in the Limelight
The wild card in the Reddit IPO was how it would play out on the often raucous r/Wall Street Betsforum.
Reddit said it would offer up to 1.76 million shares through a directed share program – or 8 percent of the IPO – at the IPO price to eligible users and moderators on its platform, certain members of its board of directors, and friends and family members of certain employees and directors, according to its prospectus.
There is no lock-up on the stock sold through the directed share program – aka “the Redditors’ shares,” as they’re known on the Street.
Reddit users were selected for participation in the directed share program, based on their karma, the prospectus says.
An IPO pro says that some of the stock in the directed share program could wind up in the hands of people with Robinhood accounts – and that could make for an interesting opening day.
Steve Huffman and Alexis Ohanian founded Reddit in their University of Virginia dorm room in 2005. Ohanian may be better known to some as the husband of tennis legend Serena Williams.
Sam Altman, the founder and CEO of OpenAI, the home of ChatGPT, is among those in a position to benefit the most from Reddit’s IPO. Altman, a former Reddit board member, holds a pre-IPO stake of 9.2 percent of the voting power of Reddit’s outstanding stock, the prospectus says. Reddit sees Altman’s ChatGPT as a competitor.
For 2023, Reddit reported a net loss of $90.8 million on revenue of $804.0 million.
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