Social media platform Reddit’s shares ended their first day of trading in New York up 48 per cent, signalling that investor appetite for initial public offerings of promising yet loss-making companies could be returning.
Reddit, which has not turned an annual profit since launching in 2005, lured investors by positioning its content as training grounds for artificial intelligence (AI) programs. Reuters reported last month that Reddit struck a data licensing deal with Google worth about US$60 million a year.
While Reddit still relies on advertising for the vast majority of its revenue, it touted AI in its IPO marketing roadshow as an area of growth. It also disclosed last week that the US Federal Trade Commission is looking into its AI data licensing deals.
“At the core we are a growth company. Achieving our mission means that we want to grow users and community,” said Jen Wong, Chief Operations Officer at Reddit.
Shares of the San Francisco-based company opened at US$47 on the New York Stock Exchange on Thursday (Mar 21) after pricing at US$34 in the IPO, the top of the company’s indicated price range. They ended trading at US$50.44.
The IPO valued Reddit at US$6.4 billion, and the company and its selling shareholders raised US$748 million. Reddit was valued at US$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.
Reuters
