Reddit’s shares ended their first day of trading in New York up 48%, signalling that investor appetite for initial public offerings of promising yet loss-making companies could be returning.
The IPO valued Reddit at $6.4-billion, and the company and its selling shareholders raised $748-million The IPO valued Reddit at $6.4-billion, and the company and its selling shareholders raised $748-million. Reddit was valued at $10-billion in a private fundraising round in 2021, and the strong stock market reception indicated that the company may not have needed to curb its valuation expectations so much to get the IPO off the ground.
Reddit’s popularity rose to new heights during the “meme-stock” saga of 2021 in which a group of retail investors collaborated on its forum “wallstreetbets” to buy shares of highly shorted companies like GameStop.As part of its plan to reward users, Reddit has reserved 8% of the shares on offer for eligible users and moderators, certain board members, as well as friends and family members of employees and directors.
“I don’t know one company which really benefits from allocating shares to their users,” said Alan Vaksman, founding partner at investment firm Launchbay Capital.