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Reddit Inc, shares soared 48% above their initial public offering (IPO) price, as investors embraced the social media company’s vision of profiting from the growth of artificial intelligence.
The San Francisco-based company’s stock closed at $50.44 each on Thursday in New York, a day after the company and some of its shareholders raised $748 million in an offering priced at the top of a marketed range.
Reddit’s IPO is the fourth largest on a US exchange in 2024, as the market for first-time share sales continues to rebound after two of the slowest years in a decade. The successful listing is set to fire the starting gun for tech companies whose offering plans have been on hold.
The AI revolution was at the center of Reddit’s proposed value proposition to investors, as companies eye the record-setting rallies in stocks like chipmaker Nvidia.
“Large language models need data,” Reddit Chief Operating Officer Jennifer Wong told Bloomberg TV. She described the company’s 19 years worth of “human experience organized by topic, with moderation and relevance — that is incredibly important to building both a chat capability and the freshness of information. That is an area where we see opportunity.”
The company’s shares jumped as much as 70% on its first day. The closing price of $50.44 each gives it a market value of $8 billion based on the outstanding shares listed in its filings with the US Securities and Exchange Commission. Including stock options and restricted share units, Reddit’s fully diluted valuation is closer to $9.5 billion.
Reddit said it’s in the early stages of allowing third parties to license access to data on the platform, including to train artificial intelligence models. The company said that in January it entered into data licensing arrangements with an aggregate contract value of $203 million and terms ranging from two to three years. It expects a minimum of $66.4 million of revenue from those agreements this year, according to the filings.
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