Reddit's IPO Surges 55%, Company Valuation Approaches USD 9 Billion

Reddit made a strong debut on Wall Street, with its value reaching nearly $9 billion shortly after trading began on the New York Stock Exchange. The company's IPO was priced at $34 a share, but it opened at $47 a share and has since climbed even higher. Despite a nearly 20-year history of uninterrupted losses, management turmoil, and occasional user backlashes, the IPO will test Reddit's ability to build a sustainable business."The supply is pretty limited and there's strong demand, so my sense is that this is going to be a hot IPO," said Reena Aggarwal, director of Georgetown University's Psaros Centre for Financial Markets and Policy. However, she also anticipates volatility in Reddit's IPO. Some investors may sell their shares to reap gains soon after the debut, potentially causing prices to drift.Reddit's large audience visits the service to discuss various subjects and get recommendations from like-minded people. In December, about 76 million users checked into one of Reddit's roughly 100,000 communities. The company set aside up to 1.76 million of 15.3 million shares being offered in the IPO for users of its service.Reddit has attracted prominent supporters such as OpenAI CEO Sam Altman, who owns 12.2 million shares of Reddit stock. Other early investors include PayPal co-founder Peter Thiel, actor Jared Leto, and rapper Snoop Dogg.Despite its broad reach, Reddit has never profited and has accumulated losses of $717 million. The company attributes these losses to a recent focus on finding new ways to boost revenue. Its efforts have helped increase annual revenue from $229 million in 2020 to $804 million in 2021.Reddit plans to increase ad sales and license access to its content in deals similar to Google's recent $60 million agreement to train its artificial intelligence models. However, the US Federal Trade Commission has opened an inquiry into the arrangement.The company has also experienced leadership instability that may deter potential investors. Co-founders Steve Huffman and Alexis Ohanian left Reddit in 2009 but returned years later. Huffman is now CEO, but his appointment came after Ellen Pao resigned as CEO amid user backlash over community bans and the firing of Reddit's talent director.In a December 2021 filing attempt that was later canceled, Huffman acknowledged the company's past challenges: "We lived these challenges publicly and have the scars, learnings, and policy updates to prove it... There will undoubtedly be more challenges to come."

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