Reddit Soars 48% on First Day of US Listing... Altman Smiles Too

The major U.S. online community 'Reddit' succeeded in a surge on its first day of listing, soaring nearly 50%. This is an encouraging sign for the recently revitalized U.S. initial public offering (IPO) market.

[Image source=AFP Yonhap News]

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On the 21st (local time), Reddit's stock closed its first trade on the New York Stock Exchange (NYSE) at $50.44, up 48.4% from the listing price. It started at $47, 38% higher than the offering price, and at one point during the session reached $57.80. Based on the closing price, the market capitalization reached $9.5 billion (approximately 12.06 trillion KRW), far exceeding the market cap based on the offering price ($6.5 billion). This approaches the $10 billion valuation it received during private funding in 2021, when the IPO market was active.

Bloomberg reported, "Reddit's IPO is the fourth largest on U.S. exchanges this year," adding, "This successful listing will serve as a starting signal for other tech companies that had previously postponed their IPO plans." TechCrunch also predicted, "Following Astera Labs' blockbuster offering, Reddit's strong IPO debut could shake up the market."

So far this year, about $8.8 billion has been raised through IPOs in the U.S., a 150% increase compared to the same period last year. Expectations are also growing around security startup Rubrik and medical payment company Weist Technologies, which are preparing for IPOs following Astera Labs and Reddit.

In particular, Reddit's successful debut is also seen as related to artificial intelligence (AI), a key driver of the recent New York stock market. Founded in 2005, Reddit is a social media platform with 73 million daily users and has established itself as a representative online platform through the 'meme stock' investment craze in its stock discussion forums. Accordingly, the company emphasized a strategy to increase profitability by selling this subscriber data to AI companies while preparing for this IPO.

Reddit confirmed that it is in the early stages of allowing third parties to access platform data, including for AI model training. Through these data licensing agreements, it expects to generate at least $66.4 million in revenue this year. Previously, it also signed a licensing agreement with Google Alphabet to apply Reddit content to Google's AI model training. Jennifer Wong, Reddit's Chief Operating Officer, explained in an interview with Bloomberg TV, "Large language models need data," adding, "We see this as an opportunity."

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Bloomberg stated, "Like Astera Labs, most of the investor enthusiasm for Reddit is attributed to its AI-related business," and evaluated, "With AI activities receiving a hot response, the stock surged 48% on its debut." The expectation that Reddit's accumulated data could be used for AI model training helped drive up the stock price. Astera Labs, a semiconductor design company that went public a day earlier, also saw its stock surge more than 70% on its first trading day, fueled by AI expectations. However, concerns have been raised that Reddit may face controversies and regulatory scrutiny related to personal data use in the process of providing data for AI model training.

Meanwhile, 'the father of ChatGPT,' Sam Altman, CEO of OpenAI, also smiled at Reddit's successful debut. Having once served as Reddit's interim CEO, he is confirmed to be the third-largest shareholder after Advance Magazine Publishers and China's Tencent, holding about one-third of the total shares. Ahead of this IPO, market attention was focused on whether CEO Altman could achieve another successful investment case. Economic media CNBC reported that day, "CEO Altman made a significant profit from Reddit's debut," noting, "The value of his Reddit shares increased to over $600 million on the first day of listing."

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