Reddit’s shares (RDDT.N) closed their first day of trading in New York with a 48% gain, suggesting a renewed investor interest in initial public offerings (IPOs) of promising yet unprofitable companies.
Despite not posting an annual profit since its inception in 2005, Reddit attracted investors by positioning its platform as a valuable resource for training artificial intelligence (AI) programs.
While advertising remains Reddit’s primary revenue source, the company highlighted AI as a key growth area during its IPO marketing roadshow. Additionally, Reddit disclosed that the U.S. Federal Trade Commission is investigating its AI data licensing agreements.
Jen Wong, Reddit’s Chief Operations Officer, emphasized the company’s growth-oriented focus, stating, “At the core, we are a growth company. Achieving our mission means that we want to grow users and community.”
Shares of the San Francisco-based company debuted at $47 on the New York Stock Exchange, surpassing their IPO price of $34, which was at the top end of the company’s price range. The stock closed at $50.44.
Despite being valued at $10 billion in a private fundraising round in 2021, Reddit’s strong stock market debut suggests that it did not need to significantly reduce its valuation expectations to successfully launch the IPO.
