Current:Home > InvestReddit shares soar on first day of trading as social media platform's IPO arrives -Stellar Financial Insights
Reddit shares soar on first day of trading as social media platform's IPO arrives
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Date:2025-04-27 07:35:36
Reddit made its debut on Wall Street Thursday in an eagerly anticipated initial public offering aimed at infusing the social media company with hundreds of millions in capital.
Shares of Reddit soared as much as 54% in their first day of trading on Thursday afternoon, reaching $52.29. That's far above the $34 IPO range projected by the company. Investors have been eager to buy shares, which helped drive up the stock price, one Wall Street expert said.
"The supply is pretty limited and there's strong demand, so my sense is that this is going to be a hot IPO," Reena Aggarwal, director of Georgetown University's Psaros Center for Financial Markets and Policy, said Thursday.
The IPO raised about $748 million, including about $228 million for Reddit shareholders who opted to sell some of their stock. Another $519 million is earmarked for Reddit, but the San Francisco-based company won't receive all that money because it still has to pay commissions and other costs associated with the offering.
Meanwhile, loyal Reddit moderators are concerned the company could make unwelcome changes to a platform that has been known for its culture of devoted users and volunteers, said Sarah Gilbert, a researcher at Cornell University who studies Reddit and is an expert on online content moderation.
Reddit's public debut, while typical for a tech company seeking to raise cash to fuel its expansion, is unusual in that the platform has set aside up to 1.76 million of the 15.3 million shares being offered in the IPO for faithful users and moderators of the platform, who are volunteers.
In the company's IPO filing, CEO Steve Huffman noted that the service was built on the efforts of its community, such as moderators and users, and that Reddit wants them to be able to participate in publicly owning the business.
Stashing aside millions of shares for users and moderators may not be as generous a gesture as it appears, Gilbert said. Reddit's top users and moderators volunteer hours of their own time to scrub hate speech and other explicit material off the discussion boards so the platform can attract a wide base of users, Gilbert said.
"In a sense, now Reddit is asking them to give them their money and maybe [the stock] will make money, but it's asking users to take that risk," she said.
The interest surrounding Reddit stems largely from a large audience that religiously visits the service to discuss everything under the sun with varying levels of seriousness, from news and politics to discussions on random topics and casual conversations with like-minded people.
Despite its broad reach, Reddit has never turned a profit — piling up losses over the years totaling $717 million. That number has swollen from cumulative losses of $467 million in December 2021, when the company first filed papers to go public before aborting that attempt.
With its revived IPO, Reddit will now have the money to finance its ambitions to expand its influence and reel in more revenue in the process.
Reddit recently signed a $60 million deal with Google in which posts from Reddit's online discussion boards will be used to train Google's artificial intelligence models. The data-sharing arrangement is significant for Google which is hungry for access to human-written material it can use to train its AI models. Last week, Reddit revealed that federal regulators are now probing its Google for AI training.
— The Associated Press contributed to this report.
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Khristopher J. Brooks is a reporter for CBS MoneyWatch. He previously worked as a reporter for the Omaha World-Herald, Newsday and the Florida Times-Union. His reporting primarily focuses on the U.S. housing market, the business of sports and bankruptcy.
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