The social media company’s initial public offering would have fit right in back then, when unprofitable growth companies with inflated valuations went public to great acclaim on a weekly basis.
In 2021, IPOs on major U.S. exchanges raised nearly US$120-billion – a quadrupling over prepandemic norms, according to data compiled by University of Florida professor Jay Ritter, who studies IPOs. Robinhood Markets Inc., the investing platform at the heart of the day-trading craze, is trading 47 per cent below its debut price. And crypto exchange Coinbase Global Inc. is down by 30 per cent from its opening day, even after the latest resurgence of crypto assets.
When stock markets in general tipped into a downturn in early 2022, a long winter descended on the IPO market from which it has yet to emerge.stock benchmarks have since made a full recovery, with even the S&P/TSX Composite Index now in record territory, corporate North America has had little desire to test the IPO market. Until Reddit, that is, which popped by nearly 50 per cent on its first day of trading, suggesting there is some pent-up investor demand.
Few expect Reddit’s successful debut to open the floodgates in the IPO market. While stocks are on a good run, companies can generally get higher valuations in the private realm.
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