Social media platform Reddit geared up for its high-profile market debut on the New York Stock Exchange on Thursday, setting the stage for other companies looking to go public this year, while testing investor appetite for new issues.
But the move is fraught with risks, analysts say. Typically shut out of bidding in an IPO, retail traders eager to gain exposure to a newly listed company buy shares only when they start trading, which could lead to a first-day pop.Allowing early access to the IPO could dampen some demand. Such buyers are also not under a lock-up period and could choose to sell when the stock starts trading, potentially increasing the price volatility.
After its launch in 2005, Reddit became one of the cornerstones of social media culture. Its iconic logo – featuring an alien with an orange background – is one of the most recognized symbols on the internet.Its 100,000 online forums, dubbed “subreddits,” allow conversations on topics ranging from “the sublime to the ridiculous, the trivial to the existential, the comic to the serious,” according to co-founder and CEO Steve Huffman.
“We don’t get many large tech IPOs. Those tend to be very popular because it’s hard to buy that kind of growth,” White said.
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