Power users and early investors celebrate as Reddit stock surges 48% on debut
In an unprecedented financial windfall, a group of Reddit users turned a substantial profit on the platform’s opening day on the New York Stock Exchange. Following its initial public offering (IPO), Reddit’s stock price soared by 48%, concluding the day at a notable $50.44 per share, significantly up from the initial $34 offer price, which has been a moment of success for everyone. This surge rewarded the platform’s power users, who had been invited to partake in the IPO through a directed-share program, with millions of dollars in collective earnings.
Reddit’s approach to its IPO was notably inclusive, blending success with a unique directed-share program (DSP) that allowed power users, alongside company insiders and their close acquaintances, to invest. This method, previously utilized by entities like Airbnb and Rivian, aims to acknowledge and reward the loyalty of active users and customers. Out of the 22 million shares sold during the offering, about 1.76 million were allocated for the DSP, equating to 8% of the total deal. Reddit determined eligibility for participation based on users’ site engagement, measured through a system known as karma.
The absence of a lockup period for DSP participants enabled them to sell their shares immediately, capitalizing on the stock’s initial surge to as high as $57.80 post-IPO. This flexibility contrasts with the restrictions placed on company insiders and early investors, who typically wait around 180 days to sell their shares.
The r/RedditIPO forum buzzed with stories of significant gains. A user by the name of LearnedButt shared a triumphant post about earning a $20,000 profit by selling shares at $54 each. Other users echoed this sentiment, sharing their own profitable experiences, albeit on different scales. However, some expressed regrets over not selling at peak prices, with one user lamenting the decision to sell at $48 after the stock dipped below $50.
Participants in Reddit’s DSP executed their share purchases through E-Trade, a platform accessible solely to U.S. residents. While many aimed for quick profits, a segment of the Reddit community saw this as an opportunity for long-term investment in a platform they’ve used and cherished for years.
Reddit’s foray into the stock market comes on the heels of the Wallstreetbets subreddit’s pivotal role in the 2021 meme stock frenzy, which saw stocks like GameStop and AMC Entertainment reach unprecedented heights. Reddit CEO Steve Huffman acknowledged the vibrant and outspoken nature of the Reddit community, viewing it as a testament to the platform’s significant role in the digital age.
As Reddit’s stock performance continues to draw attention, the successful IPO underscores the platform’s unique position in the social media landscape and its profound connection with its user base. This event marks a significant milestone for Reddit and its community, blending the realms of social media and finance in a way that rewards long-standing and active members of the platform.
