Reddit lands on Wall Street and makes a splash. The price of the popular US social network was expected at 34 dollars, but opened trading above 47 dollars. After a few minutes, the further jump to more than 53 dollars. For the first IPO social media company since 2019, this is a success, which however will have to be supported by fundamentals.
Reddit is worth almost 7.5 billion dollars, about a billion more than analysts’ estimates. Now we await consolidation, especially in view of the US elections. Reddit, especially during the years of the Trump administration, was the subject of various criticisms for its lack of moderation of published content. An element that has favored conspiracy theories and the alt-right. But now, with tighter control, he has changed his tune. Choice rewarded by investors.
From QAnon and WallStreetBets to the listing, passing through the rebirth. The Rddt ticker on the New York Stock Exchange was one of the most followed of the day. And to think that just a few years ago the social aggregator founded in 2005 by Steve Huffman, Aaron Swartz, Alexis Ohanian in San Francisco ended up in the cauldron of criticism from US liberal politicians. The lack of moderation of comments, to a large extent, allowed the spread of pornographic, racist, anti-Semitic, or otherwise illicit or controversial content. It was no coincidence that US white supremacists introduced pro-Donald Trump memes on Reddit. And that stock market cases like that of GameStop were created, whose swing held sway for the first months of 2021. But then the wind changed. The moderation of what users published on the social network was much more incisive and so we returned not only to talk of misinformation, but also of listing on Wall Street. No sooner said than done.
Eight hundred million dollars in turnover, 73 million daily users, Reddit still has to push the accelerator to have a profitable balance sheet, but this has gone unnoticed compared to the prices on Wall Street. Of course, the initial valuation of the listing, $6.4 billion, is much lower than the 2021 financing round, when it reached an estimate of around $10 billion. However, considering the segmentation of the reference market, with Instagram and TikTok reigning supreme among teenagers, Reddit’s result is still positive.
Five years later, after Pinterest in 2019, a new stock linked to social media captures the interest of investors. What has changed is the surrounding environment, which has become more frenetic and more competitive. In particular, the long rally on Wall Street is sobering. The S&P 500 index continues to touch historic highs, today it exceeded 5,200 points for the first time. And the Dow Jones is approaching 40 thousand points. Also in this case a record. The euphoria around tech, at least the American one, knows no limits. Reddit, according to Wells Fargo, is no exception. But the next few weeks will determine how robust the initial price is compared to the development model of the Californian company.