On the heels of Astera Labs’ successful IPO, Reddit shares skyrocketed 48% to close above $50 could boost other companies considering their own public offerings, experts said Fortune.
“Reddit and Astera are both strong green signals for the recovery of the IPO market. This was something we anticipated,” said Matt Kennedy, senior IPO strategist at Renaissance Capital, a provider of pre-IPO research that manages two IPO-focused ETFs. Fortune. “We had rate cuts on the horizon, stock markets at all-time highs – the really strong debut of tech IPOs was the missing piece of the puzzle.”
With Astera and Reddit the first major tech IPOs in the past six months, their performance will be closely watched not only by investors but also by companies evaluating their own offerings, Kennedy explained. It may not be immediate, he added, but IPOs could start picking up towards the end of the year.
Acknowledging that there is pent-up energy for companies to go public, Andrew Saeta, chief executive of secondary market Forge Global, agreed that it could still be a few months before companies feel confident enough to pursue an IPO, at least at due to uncertainty about the situation. when the Federal Reserve begins cutting key interest rates.
70% increase
Reddit shares traded as high as $57.80, a 70% increase from an initial list price of $34, but were down slightly in after-hours trading as of 7 pm ET.
Brianne Lynch, head of market insight for EquityZen, a marketplace for private companies, described Reddit’s first day of trading as relatively calm, especially compared to the chatter leading up to the IPO. The shares, made available to tens of thousands of “super users”, exploded to $47.
Compared to the public debut of other social media platforms like Meta (at the time, still Facebook) and Snap, Kennedy said Reddit falls somewhere between these two, and is certainly the largest IPO for a major social platform from that of Pinterest in 2019.
But unlike other platforms that have offered stock, Reddit’s ecosystem is unique, and its executives may now face additional pressure to keep the site’s moderators and users happy. How this will affect stock prices remains to be seen.
Recent attempts by Reddit executives to monetize content, including an AI-related deal with Google for $60 million a year, have received pushback from Redditors, including moderators.
Reddit “simply couldn’t have hundreds of thousands of subreddits without the work of volunteers, essentially,” Lynch added. “They need these moderators, and I think part of the idea of allowing super users to participate in the IPO is to make them really feel like stakeholders: it’s a skin thing.”