$RDDT IPO

Reddit's shares surged 48% in their debut on Thursday, marking the first initial public offering for a major social media company since Pinterest's IPO in 2019.

The 19-year-old website, known for hosting millions of online forums, priced its IPO on Wednesday at $34 a share, the top end of the expected range. Reddit and selling shareholders raised about $750 million from the offering, with the company collecting approximately $519 million.

Trading under the ticker symbol "RDDT," Reddit's stock opened at $47 and reached a high of $57.80, representing a 70% increase at its peak for the day. It closed at $50.44, giving the company a market capitalization of around $9.5 billion.

Reddit's IPO is seen as a test of investor appetite for new tech stocks after a prolonged dry spell for IPOs. Since the peak of the technology boom in late 2021, few venture-backed tech companies have gone public, and those that have, such as Instacart and Klaviyo last year, have not met expectations. The strong debut of data center hardware company Astera Labs on Nasdaq on Wednesday, with its shares soaring 72%, underscores investor excitement over businesses tied to the surge in artificial intelligence.

At its IPO price, Reddit was valued at about $6.5 billion, lower than its private market valuation of $10 billion in 2021. The tech industry experienced a shift in 2022 due to rising interest rates and soaring inflation, leading investors to move away from high-risk assets. Startups responded by conducting layoffs, reducing their valuations, and prioritizing profit over growth.

Reddit reported annual sales of $804 million for 2023, up 20% from $666.7 million the previous year. The company's net loss narrowed to $90.8 million last year from $158.6 million in 2022.

Based on its revenue over the past four quarters, Reddit's IPO market cap gave it a price-to-sales ratio of approximately 8. In comparison, Alphabet trades for 6.1 times revenue, Meta has a multiple of 9.7, Pinterest's sits at 7.5, and Snap trades for 3.9 times sales, according to FactSet.

In its prospectus, Reddit listed X, Discord, Wikipedia, and Amazon's Twitch streaming service among its competitors.