Monday, March 25, 2024 12:13:06 PM
Written by Sanghamitra Saha for Zacks ->March 25, 2024 — 07:16 am EDT
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The popular social media platform Reddit RDDT celebrated a triumphant entry to the New York Stock Exchange on Thursday, with its shares skyrocketing 48% on debut, reaching a market capitalization of $9.5 billion. Reddit's success, marked by selling $748 million in shares, has ignited hopes for a revived IPO market, which has been sluggish since 2021. Shares slumped 8.8% on Friday, probably on profit booking.
ETFs in Focus
The market debut of Reddit could pave its entry into a number of ETFs in the coming days. Investing in IPO ETFs could be a compelling way to enter the IPO business without directly investing in individual companies. IPO ETFs are funds that invest in a basket of companies that have recently gone public, providing diversified exposure to the IPO market. Plus, the stock may be included in several sector ETFs that align with the space Reddit operates in.
These ETFs include Renaissance IPO ETF IPO, First Trust US Equity Opportunities ETF FPX, Communication Services Select Sector SPDR Fund XLC, Global X social media ETF SOCL, Invesco NASDAQ Internet ETF PNQI and Invesco AI and Next Gen Software ETF IGPT.
Reddit’s User Metrics and Engagement
In the three months leading up to December 31, 2023, Reddit boasted an average of 73.1 million daily active users and 267.5 million weekly active users. The platform also noted the presence of over 100,000 active communities and a remarkable 1 billion cumulative posts. These metrics underscore Reddit's broad user base and vibrant community engagement.
Strategic Partnership With Google and Valuation
Before its IPO, Reddit secured a strategic partnership with Alphabet's Google (GOOGL), indiacting its intent to leverage artificial intelligence capabilities. The deal, estimated at $60 million annually, highlights Reddit's commitment to enhancing its platform.
The deal allows Google to train AI models on its posts. Moreover, Sam Altman, renowned for his role at OpenAI, has invested over $60 million in Reddit, securing a 9.2% share of the voting power within the online discussion platform.
Reddit's journey to the public market reflects a broader transformation for the platform, from a fringe community to a mainstream discussion hub. Despite initial reservations, Reddit's IPO has been well-received, indicating robust public investor interest in new listings, even for unprofitable entities like Reddit.
Financial Windfall for CEO Huffman
The IPO proved lucrative for Reddit's CEO, Steve Huffman, who sold a significant portion of his shares, netting $17 million. The need to attract advertisers and satisfy Wall Street expectations has led Reddit to a shift toward a more controlled and profitable model. AI technology has become a crucial point in Reddit's strategy, as indicated in its recent IPO prospectus.
I've never claimed to have all the answers but feel i'm beginning to corner the market in questions worthy of them.
Recent RDDT News
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- Form 3 - Initial statement of beneficial ownership of securities • Edgar (US Regulatory) • 05/09/2024 10:06:54 PM
- Reddit to Participate in Upcoming Investor Conferences • Business Wire • 05/09/2024 06:23:00 PM
- Reddit Rises 15% After First Quarterly Report, Upstart and Twilio Plunge Due to Weak Q2 Forecast, and More in Earnings • IH Market News • 05/08/2024 12:23:27 PM
- Form 8-K - Current report • Edgar (US Regulatory) • 05/07/2024 08:15:37 PM
- Reddit Announces First Quarter 2024 Results • Business Wire • 05/07/2024 08:07:00 PM
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