Reddit: RDDT IPO closes above $50 on first day of trading

Reddit (RDDT) stock closed up 48.4% on Thursday. Its IPO only began trading at $50.44 at 13:15 EST. The stock gained as much as 70% for an intraday high of $57.78 early in the session.

Reddit has finally come to Wall Street after nearly two decades of operations. Founded in 2005 by University of Virginia roommates Alexis Ohanian and Steve Huffman, Reddit is ranked as one of the top 20 most popular sites on the internet globally. The social media site was priced at $34 a share or $6.4 billion in market capitalization before trading began.

The timing is good for Reddit stock as US stock exchanges are rising following remarks on Wednesday by Federal Reserve (Fed) Chair Jerome Powell, who said that the central bank would soon begin tapering its “quantitative tightening” program. The policy has seen the Fed reduce its balance sheet by $1.4 trillion thus far, and tapering that decline would theoretically make more room for investments in equities.

The Dow Jones has gained 0.7%, while the NASDAQ Composite advances 0.2% at the time of writing. 

Reddit stock news: The IPO is here

Another reason to be hopeful for the Reddit IPO is that Astera Labs (ALAB), a pure play on the hype surrounding artificial intelligence semiconductors, exploded 72% on its IPO on Wednesday.

Could Reddit follow suit? Possibly. The company has been priced at the top end of its range, but its $6.4 billion starter market cap is about half of the $10 to $15 billion valuation it was rumored to be worth back when management first began flirting with an IPO in late 2021. 

Reddit has more than 267 million active weekly users, a figure that few other websites can boast. Revenue rose by 21% to $804 million in 2023, and management was able to cut losses in half to just below $91 million.

Many observers think that Reddit stock could become a new meme stock since so many retail investors already use the platform. In fact, the r/WallStreetBets forum in which the meme stock craze of early 2021 emerged was listed on Reddit.

This could lead to a large surge in the share price as it did in the past for GameStop (GME) and AMC Entertainment Holdings (AMC). Like those stocks, Reddit lends itself to the meme sector since the platform is well-known for posting GIFs and internet memes.

Reddit stock chart

RDDT 5-minute chart