Reddit CEO Steve Huffman stands on the floor of the New York Stock Exchange (NYSE) as the bell rings on the floor to set the stock price at $47 in its initial public offering (IPO) on March 21, 2024 in New York City.
Spencer Platt | Getty Images News | Getty Images
Reddit The stock's top rating among analysts was Hold. But the march continued anyway.
Shares rose 8.8% on Tuesday to close at $65.11. It's now up 92% since its stock market debut last week under the ticker symbol “RDDT.” This was the first social media IPO since then pinterest Show in 2019.
Reddit and existing shareholders sold 22 million shares in the offering, raising nearly $750 million combined. More than 35 million shares of Reddit stock changed hands on Tuesday, the most since the 48.7 million shares traded on the company's opening day on the market.
Investors continued to buy Reddit shares despite New Street Research issuing a neutral rating for the company “after the stock has hit the moon,” analysts wrote in a note published Tuesday.
The analysts said they would not change their $54 price target, and that they expect “volatility in the first earnings report.” The company has not yet set an announcement date, but New Street said it will likely be announced in May. Insiders are prohibited from selling shares until the post-IPO lock-up period expires 180 days after the offering.
“OpenAI data license win is being consolidated into the stock,” New Street analysts wrote, meaning investors see Reddit benefiting if it signs a licensing deal with the maker of ChatGPT. Investors expect such a deal to be added soon, considering that OpenAI CEO Sam Altman owns a significant stake in Reddit, they wrote.
The company's market value has swelled to about $12.3 billion as of Tuesday's close. Altman's stock is worth about $800 million.
Although Reddit's core business is online advertising, the company has pointed to data licensing as a potential source of significant income. It also recently entered into an expanded partnership with GoogleWhich allows the search giant to access more Reddit data to train its AI models.
However, the Federal Trade Commission is investigating Reddit's data licensing business.
“At first glance, it appears relatively benign, but it could be a burden,” New Street analysts wrote, noting that “the FTC investigation could slow the pace of signing new deals and will certainly require dedicated attention and time to process the investigation.” “.
Meanwhile, some Reddit users took to the company's subreddits on Tuesday to discuss the stock's rise. A number of users, along with some of the company's employees and their family members, were part of Reddit's guided sharing program and were not subject to a lockout period, allowing them to collectively make millions of dollars via post-pop sales.
“All the people doing the quick cash IPO seem to be helping the company go higher today with fewer people wanting to sell at these levels,” wrote a Reddit user with the username “bkarp00,” referring to shareholders who believe Reddit stock It will continue to increase in value.
User “IrishRun” wrote, “I was beating myself up for not buying more shares, but there was no guarantee that I would receive the desired number and hence I would probably still wish I had bought more.”
