April 20, 2024

Reddit stock surged as much as 70% on Thursday as the company kicked off its highly anticipated initial public offering. Shares rose to a high of $57.80, well above the company’s IPO price of $34 set the day before.

Reddit is the first major social media company to go public since Pinterest in 2019. Reddit’s IPO pricing was the highest end of the range the company had set earlier of $31 to $34 per share, in line with expectations. At that price, the company and its shareholders would raise $748 million, valuing the company at $6.4 billion. But at its high on Thursday afternoon, the company’s market cap soared up to $10.9 billion.

Even with the buzz about its initial price pop, co-founder and CEO Steve Huffman told Yahoo Finance on Thursday morning that “the price is the last thing on my mind… it’s an exciting moment, but we’re building this for the long run.” Huffman said institutional investors “are very interested in where this company can go.”

Investors, Redditors, and some analysts had been skeptical about how well Reddit stock will perform. That’s because Reddit is still a money-losing company, posting a loss of $91 million in 2023. The site also relies on its volatile Redditors to generate content, and its success (via ad revenue) depends on their willingness to continue posting on the site.

Experts also warned that investors should be wary of Reddit’s initial success.

“As many predicted, Reddit’s share price looks to be rocketing up today as one of the most hyped IPOs of the last few years gets underway,” financial adviser George Sweeney of the personal finance site Finder said in a statement. “Whilst there is a chance this continues due to it being so closely tied to the ‘meme stock’ phenomenon it helped facilitate back in 2021, investors should be very careful. In fact, there’s even plenty of chatter on Reddit itself from users planning to short the stock and cash in on the surrounding buzz.”

Even in the first hour of trading, the stock fell slightly from its initial high to a share price closer to $50.

Reddit’s IPO has been in the works for years, with the company hiring a CFO in preparation to go public in 2021. But the platform faced hurdles as hackers breached its network in February 2023, and later that year, Redditors protested new API pricing.

Reddit’s mascot Snoo rang the opening bell at the New York Stock Exchange on Thursday morning. To mark the moment, co-founder Alexis Ohanian posted a photo of “the very first Snoo costume” on X. (A fun fact: Back in Reddit’s founding days, Ohanian and Huffman wanted to build a food delivery service before they landed on the concept for the social platform.)

This is a developing story and will be updated.

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