NEW YORK — 

Upon its Wall Street debut, Reddit saw a significant increase in value as investors drove the company’s worth to nearly $9 billion in just seconds after it started trading on the New York Stock Exchange.

Reddit’s initial public offering was priced at $34 per share and it went public on Thursday with a debut price of $47 per share. As of 1:20 p.m. ET, the trading price has increased further, with shares for the self-proclaimed “front page of the internet” rising by over 55%.

The IPO will gauge the unique company’s capability to address a nearly two-decade span marked by continuous losses, leadership instability, and occasional pushback from users to develop a viable business model.

According to Reena Aggarwal, director of Georgetown University’s Psaros Center for Financial Markets and Policy, the supply is restricted and there is high demand, indicating that the IPO will be highly sought after. She predicts that Thursday’s trading for Reddit will be very active. Aggarwal also mentions that the current market is favorable for Reddit.

However, she also expects Reddit’s Initial Public Offering to experience fluctuations. Despite a significant increase in value, there is a chance that certain investors may decide to sell their shares and cash in on their profits quickly, potentially resulting in a decrease in prices.

One reason for Reddit’s popularity is the devoted community that frequently visits the site to engage in discussions about a wide variety of topics, including humorous memes and deep existential concerns. It is also a place where users can receive suggestions from others who share their interests.

According to the regulatory disclosures necessary prior to its initial public offering, about 76 million individuals logged in to one of Reddit’s approximately 100,000 communities in December. In its IPO, the company has reserved up to 1.76 million of the 15.3 million shares being offered for its service’s users.

As is customary with IPOs, it is anticipated that mutual funds and other institutional investors will primarily purchase the remaining shares, speculating that Reddit is prepared for success in the finance industry.

Reddit has garnered the attention of notable advocates, such as OpenAI’s CEO Sam Altman, due to its potential to generate revenue. Altman, an early investor, now holds one of the largest ownership stakes in the company with 12.2 million shares, as listed in Reddit’s IPO filings.

Some of Reddit’s initial investors have been PayPal’s co-founder Peter Thiel, Academy Award-winning actor Jared Leto, and rapper Snoop Dogg. However, they are not among the major shareholders for Reddit’s upcoming IPO.

According to the tech field’s norms, Reddit still maintains a remarkably modest size for its longevity in the industry.

Reddit has never profited from its broad reach while piling up cumulative losses of $717 million. That number has swollen from cumulative losses of $467 million in December 2021 when the company first filed papers to go public before aborting that attempt.

According to its latest IPO filings, Reddit reported losses due to its recent efforts to generate more revenue through alternative means.

Shortly after its inception, Reddit was acquired by Conde Nast, a publisher of magazines, for $10 million. This allowed the company to operate under a parent company and not as a standalone business. Despite being spun off by Advance Magazine Publishers in 2011, Reddit did not prioritize revenue generation until 2018, as stated in its IPO filing.

Those efforts, mostly centered around selling ads, have helped the social platform increase its annual revenue from $229 million in 2020 to $804 million last year. But the San Francisco-based company also posted combined losses of $436 million from 2020 through 2023.

Reddit proposed a plan in its document that involves increasing advertising revenue on its platform, as it sees the site as a strong tool for companies to market their products due to the large number of users who search for product recommendations.

The corporation is seeking to generate additional revenue by selling access to its content through licensing agreements, such as the $60 million deal made with Google for training their artificial intelligence technology. However, this goal was met with a quick obstacle as the U.S. Federal Trade Commission launched an investigation into the agreement.

As this is Reddit’s initial day as a publicly traded company, Aggarwal emphasizes that the primary indicator of success will be determined by the company’s upcoming earnings presentation.

According to the speaker, now that they are a publicly traded company, they will be required to disclose more information in their upcoming earnings report. She believes that the market will closely monitor this information.

Reddit’s leadership has had unstable periods, which could deter potential investors. Co-founders Steve Huffman and Alexis Ohanian, who is also the spouse of tennis star Serena Williams, both left the company in 2009 while Conde Nast was still in charge. They eventually returned several years later.

Huffman, who is 40 years old, currently holds the position of CEO. However, the circumstances surrounding his hiring serve as a reminder of the chaos that can occur at Reddit. This change in leadership took place in 2015 when Ellen Pao stepped down as CEO following a negative reaction from users over the banning of certain communities and the dismissal of Reddit’s talent director. Although Ohanian claimed responsibility for the bans and dismissals, Pao bore the brunt of the angry backlash.

Huffman briefly mentioned the company’s previous struggles in a separate communication included in a December 2021 submission that was later withdrawn, despite not addressing it in his letter to investors leading up to the IPO.

In 2021, Huffman wrote that we have faced and shared these challenges openly, resulting in scars, lessons, and policy changes as evidence. Our past experiences will impact our future, and we can expect more obstacles ahead.

Source: voanews.com