Investors have upvoted Reddit in droves.
Reddit stock began trading on the New York Stock Exchange Thursday after the initial public offering priced at $47 a share — topping its offering price of $34 for each share — as investors showed enthusiasm for a social media site that has ambitious expansion plans but has never been profitable.
With the pop of its opening price, notching just above $55 a share during the day, Reddit's valuation soared to around $10 billion, trading under the ticker symbol RDDT.
The IPO is being viewed as a test of investor appetite for a tech company to go public in an environment battling stubborn inflation, high interest rates and economic uncertainty, which have slowed the number of tech firms that have debuted on the stock market.
It is also seen as a gauge of Wall Street's interest in a social media company in an era where artificial intelligence is all the rage in the technology industry.
Reddit, a ragtag collection of message boards that draw close-knit communities where people discuss topics anonymously, has had a bumpy journey to becoming a public company over its nearly 19-year history.
Over the years, it has been beset with leadership crises and controversies over the proliferation of racist, misogynistic and other toxic content going unchecked before laboring to clean up its act more recently.
The premiere of Reddit on the New York Stock Exchange brought a lucrative payday for the parent company of Condé Nast, the owner of Reddit, which controls about a third of the company's shares. The publisher reaped more than 2 billion in the debut, after paying just $10 million for Reddit in 2006 through its holding company, Advance Publications. For the Condé Nast-owning Newhouse family, it was a 5,800% windfall, the Bloomberg Billionaires Index estimates.
Behind the owner of Condé Nast, Reddit's No. 2 shareholder is Chinese tech company Tencent. Sam Altman, the CEO of ChatGPT maker OpenAI, is Reddit's third-largest shareholder, according to a filing with the Securities and Exchange Commission.
A decent chunk of Reddit's shares have been set aside for users of Reddit, and individual investors, an uncommon move that could add an element of unpredictability to the stock. But it remains to be seen what kind of influence the regular Reddit users will have on the stock's performance.
Journey from college dorm room to the NYSE
Founded in 2005 by Alexis Ohanian and his dorm-mate at the University of Virginia, Steve Huffman, the site started as an gathering place for people to discuss politics, popular TV shows and memes, often veering into crude jokes and envelope-pushing humor. Elsewhere, though, the site exhibits pure joy, or absurdism. One Reddit community has sprung up around the sharing of photos depicting bread stapled to trees.
Huffman left the company, in 2009, only to return six years later as chief executive.
Ohanian, who is married to tennis superstar Serena Williams, left Reddit in 2018, and, in 2020, he stepped down from the company's board.
June 23, 2005. Version One of @Reddit. My first post ever was a link to the Downing Street Memo. Ship early. Ship often. pic.twitter.com/J7SgfZUHTr
— Alexis Ohanian 🇦🇲 (@alexisohanian) March 21, 2024
The site became known for "AMAs," or "ask me anything" question-and-answer sessions that sometimes attracted prominent figures, like President Barack Obama, evolutionary biologist Richard Dawkins and actor Harrison Ford.
Its user base has gradually swelled, with now 73 million people visiting the site daily across more than 100,000 communities, according to the company.
Reddit has long been the world's most popular message board where scores of volunteer moderators decide the rules of each community — a level of autotomy unusual for a social network the size of Reddit, but something that has made many users forge deep ties and allegiances to the site.
Reddit users can purchase stock based on "karma"
In a letter earlier this month that accompanied its regulatory filing, Huffman, Reddit's CEO, said he hopes going public will benefit the site's community, along with investors. "Our users have a deep sense of ownership over the communities they create on Reddit," Huffman wrote.
As such, Reddit set aside about 8% of company share for superusers of the site, with each users' allotment determined by "karma," a kind of reputation assessment based on a user's contributions to the site.
In 2021, Reddit became the center of a stock market firestorm when a subreddit known as WallStreetBets helped organize small investors to send the stock of videogame retailer GameStop soaring to extraordinary highs, shooting up more than 1700 percent, an event that prompted a Wall Street trading frenzy and put the spotlight on Reddit's role in so-called meme stocks.
Ahead of the public offering, Redditors in WallStreetBets appeared eager to throw sand in the gears yet again by betting against Reddit for, as they see it, forsaking the site's scruffy authenticity in order to maximize profits.
"Reddit cannot pivot into something that will magically attract new users to the cite creating a miracle monetization regime," wrote one user in WallStreetBets. "The golden age of Reddit has passed, if it ever existed...The desperate attempt to cling to an overvalued market price will destroy the company from the top throughout the long term."
"It's time we grow up and behave like an adult company"
In recent months, Reddit has taken a number of controversial steps widely seen as preparing for a public offering, which it first unveiled plans to take the public public. Among them, charging third-party developers for access to its back-end data. The change prompted thousands of Reddit communities to stage an organized blackout.
Last June, Huffman told NPR that Reddit did not change the company's plans to start charging for data, despite how it upended the popular site.
"It's a small group that's very upset, and there's no way around that. We made a business decision that upset them," he said.
Reddit becoming a public company has made many diehard Reddit bristle since the corporatization chafes against the renegade spirit of the site.
In response, Huffman told NPR in June that the reckoning that Reddit is now in the grips of has been long overdue.
"We're 18 years old," Huffman said. "I think it's time we grow up and behave like an adult company."
