Share price rises 48% on first day of trading, internet company makes $519 million profit

UPDATED: Investors flocked to Reddit’s IPO on Thursday, driving the discussion forum company’s stock price up 48 percent in its stock market debut. The IPO — expected to be one of the biggest tech stock offerings of the year — raised $519 million for Reddit and provided a windfall for existing shareholders, including Advance Publications, Condé Nast’s parent company, and OpenAI CEO Sam Altman.

Reddit shares began trading on the New York Stock Exchange at approximately 1:15 p.m. ET on Thursday (March 21) under the ticker symbol “RDDT.” The initial offering price was $34 per share, valuing Reddit at $6.4 billion (less than its previous private valuation of $10 billion). Shares opened at $47 and rose as high as $57.80 apiece (up 70%) before closing at $50.44 during regular trading, giving them a market cap of approximately $9.5 billion.

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Reddit, the 19-year-old company once considered “the front page of the internet,” said it plans to use the net proceeds from the IPO for general corporate purposes and possibly to “in-license, acquire or invest in complementary technologies, assets or intellectual property.”

On Wednesday, Reddit announced the price of its IPO at $34 per share – the high end of its previous range. A total of 22 million shares of Class A common stock were sold in the offering (15.28 million from Reddit and 6.72 million from other shareholders). In addition, Reddit has granted the underwriters a 30-day option to purchase up to an additional 3.3 million shares at the IPO price.

“We built Reddit on the belief that communities unleash the power of human creativity and provide a sense of belonging and empowerment to their members,” the company’s prospectus states. “Our 100,000+ active communities” – known as subreddits – “have channeled the power of human creativity to grow Reddit since our inception.”

Advance Publications owns 42.2 million Reddit shares, worth more than $2.1 billion after the IPO. Condé Nast acquired Reddit for $10 million in 2006 and spun it off in 2011. OpenAI’s Altman, who owns or controls about 12.16 million Reddit shares, owns a stake currently worth $613 million.

Reddit said that “virtually all” of Advance, Altman and other insiders’ stock and convertible bonds will be subject to a 180-day lock-up period before the IPO, during which they will not be allowed to sell their shares. Reddit CEO Steve Huffman earned $17 million in the IPO by selling 500,000 shares; the remaining 4.17 million shares he owns directly are subject to the lock-up period.

In a novel arrangement, Reddit’s underwriters reserved a portion of the shares for moderators and other power users of the discussion platform. Up to 1.76 million shares (8% of the shares at the IPO) were available through a targeted stock program at a price of $34 per share to “eligible users and moderators of our platform” as well as certain board members and “friends and family members of some of our employees and directors.” They are not subject to the lock-up restrictions.

For 2023, Reddit reported revenue of $804.0 million, up 21% year over year, and a net loss of $90.8 million, compared to a loss of $158.6 million a year earlier. In December 2023, Reddit had more than 500 million visitors and an average of 73.1 million daily active unique users worldwide in the fourth quarter. The company employed 2,013 full-time employees at the end of 2023.

In addition to advertising revenue, Reddit monetizes posts on its platform through AI data licensing deals signed in January 2024 that the company said total $203 million with terms of 2-3 years. Last month, Reddit and Google announced a pact that allows the internet giant to use Reddit data to train its AI models, worth about $60 million annually, according to Reuters.

The lead underwriters for Reddit’s IPO are Morgan Stanley, Goldman Sachs, JPMorgan Chase and Bank of America.

To celebrate Reddit’s IPO, the company released a video showing a “day in the life” of its mascot Snoo as he prepares to go to the NYSE and ring the bell: