Reddit’s IPO Surge: Shares Indicated to Open 53% Above Offering Price
On March 21, Reddit’s shares were poised to open up to 53% higher than their initial public offering (IPO) price as they debuted on the New York Stock Exchange. This surge in value could potentially value the social media platform at $9.81 billion.
The San Francisco-based company priced its IPO at the top end of the $31 to $34 range, valuing Reddit at $6.4 billion. In the IPO process, Reddit and its selling shareholders raised $748 million. The journey to becoming a publicly traded company has been in progress for over two years, with Reddit confidentially filing for an IPO in December 2021. However, due to the stock market downturn caused by the Federal Reserve’s quantitative tightening, there was a delay in the process.
Reddit’s highly anticipated debut as a publicly traded company will serve as a significant test for the IPO market, which has shown signs of recovery recently. Julian Klymochko, CEO of Accelerate Financial Technologies, highlighted the importance of Reddit’s performance in shaping investor sentiment towards IPOs. The shares were expected to open between $50 and $52 each.
Reddit gained widespread attention during the “meme-stock” frenzy of 2021, where retail investors collaborated on the “wallstreetbets” forum to purchase shares of heavily shorted companies like GameStop. In a move to reward its user base, Reddit allocated 8% of the shares for eligible users, moderators, certain board members, and friends and family of its employees and directors. Additionally, some shares were offered to retail investors through online brokerage platforms such as Robinhood, SoFi, Morgan Stanley Wealth Management, and Fidelity Brokerage Services.
However, analysts have cautioned that this strategy carries risks. Retail traders, who are typically excluded from participating in the IPO bidding process, may rush to buy shares once trading begins, potentially leading to an initial surge in share prices.
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