When is a Reddit Stock IPO coming? Right now, we’re not sure. Just because they’re not a public company right now doesn’t mean they won’t be at some point in the future. They’re a popular site on the internet. And one that has recently changed the trading game. They’ve given retail traders more power than ever.
If you follow the stock market, you have probably at least heard of Reddit after 2021. Reddit was an important player in a certain short squeeze that took place earlier this year. It’s also an important tool for many retail investors in an age where social media has played a key role in the financial world.
Reddit is a social media platform unlike any other. It is equal parts news aggregation, discussion boards, and content submission. The site is widely seen as a place where users can openly discuss problems or issues that occur in everyday life. At this point, there is a subreddit built for every topic under the sun.
Reddit was founded back in 2005 by Alexis Ohanian, Steve Huffman, and the late Aaron Swartz. After several years, the team sold Reddit to Conde Nast Publications but later returned to leadership roles in 2014.
Much of Reddit’s growth can be attributed to their return, including a brighter layout and the addition of ad revenue. In 2020, Alexis Ohanian stepped away from the company due to the ongoing protests of the murder of George Floyd. He asked to be replaced by a ‘black candidate’, which he was. When asked why he stepped away, Ohanian cited his two-year-old daughter and African American wife Tennis star Serena Williams, as his main motivations.
As recently as September of 2021, Reddit was the 19th most visited website in the world and the 7th most visited in the US. This puts Reddit amongst some very elite companies in the internet world. But is a Reddit stock IPO coming?
Is a Reddit Stock IPO Coming?
Considering how well social media companies have fared as publicly traded companies, this should come as no surprise. Reddit announced earlier in 2021 that it had confidentially filed documents with the SEC to go public at some point in 2022. Should investors be excited? Ultimately, that remains to be seen. Reddit’s latest round of funding has valued the company at around $10 billion. While that sounds impressive, it pales in comparison to other social media sites like Facebook, Twitter, and Snapchat.
There were rumors last year that Reddit would be going public via a SPAC merger, but those seem to have died down. Considering Reddit filed directly with the SEC, tells us that it intends to go public the old fashioned way: an IPO. This past year marked a record-setting number of new companies that hit the public markets. In total, there were over 1,000 companies that went public in the US markets alone. It looks like Reddit is at least one hot IPO that is waiting for the calendar to flip!
Will Reddit be a Good Stock?
It’s really hard to tell with public brands like Reddit. There could be a mad rush of investors buying the stock in support of the beloved platform. It is pretty easy to see all of the AMC Apes rushing to pick up shares on the first day.
Reddit holds a spot in many people’s hearts so when a brand is that popular, the stock gets a lot of extra hype.
As for the company’s performance, Reddit has shown some nice growth over the years. The platform continues to add users in each sequential year, with 2021 hitting over 50 million daily active users.
While that does seem impressive, keep in mind Facebook sees nearly 2 billion daily active users and Twitter sees over 200 million. When you compare it with the big boys, Reddit still has a ways to go.
But being a publicly traded company adds an injection of capital for the company that it likely wouldn’t have seen from private investors.
Can Reddit utilize this and grow its company even more? As an investor, I would definitely like to see some sort of evolution of the platform into something more than just a giant discussion board.
However, we’re still waiting on a Reddit stock IPO. So while we wait, let’s look at comparable stocks we can trade in the social media sector.
Reddit Stock IPO and the Stock Market
Before January of 2021, everyone knew what Reddit was but probably did not quite know the power behind it. The short squeeze event of stocks like GameStop (NYSE: GME) and AMC (NYSE: AMC) was led by retail investors.
These investors discussed their ideas on subreddits like r/WallStreetBets and beat Wall Street at its own game. The influence of social media and social sentiment is replacing traditional stock research. Rather than reading financial reports on a company, traders are more likely to get intel from a site like Chatterquant, which provides real-time social media sentiment for stocks and cryptocurrencies.
It is a new age of investing and one where traders are not afraid to take on risk. New traders will blindly follow things they see on Reddit, and some discussion boards even flaunt major financial losses. The very psychology of traders has changed and sites like Reddit have been empowering this change. For better or for worse, the world of investing in the stock market has been altered forever.
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Reddit Stock Competitors
Now that Reddit will be on the stock market, it’s going to be compared to other platforms on a regular basis. Reddit might be the cool social media site for non mainstreamers, but that doesn’t really matter if it isn’t showing revenue growth and profitability. Things change when you are a public company, and social media is a tough market to be in! So we’ll see how this Reddit stock IPO does.
1. Meta Platforms (NASDAQ: META)
Facebook, or Meta Platforms as it is now known, is always a very interesting company to look at. It is perhaps the most polarizing brand in the world. Facebook is at the same time, one of the most successful companies and one of the most despised. But as far as social media goes, nobody does it better. Meta Platforms owns Facebook, Instagram, and Whatsapp, as well as the VR headset company Oculus Rift.
As you can probably tell from the name change, the company is rapidly moving into the Metaverse industry. Meta Platforms is attempting to revolutionize the internet as we know it and has the inside track to being the industry leader for decades to come.
2. Twitter (NYSE: TWTR)
Twitter is another interesting case when it comes to real life companies versus their stocks. As an information source, Twitter is essential to millions of people around the world. But as a stock, Twitter has traded basically flat since it went public back in 2013.
Even though it is an invaluable source of information, news, and discussion, Twitter has never been able to properly monetize its platform. It is often compared to Facebook.
But Twitter has a market cap of $34 billion and Meta Platforms is nearly $1 trillion. Something is clearly being done differently between the two businesses!
3. Snap Inc (NYSE: SNAP)
More commonly known as its platform name Snapchat, Snap Inc is a social media app that uses video clips and augmented reality technology. Snap has reported seeing daily active use figures in the area of 300 million as of 2021. The platform has seen increased competition from other apps including China-based Tik Tok.
Unfortunately for Snap investors, 2021 was not an ideal year for the stock. Snap was one of the first casualties of the new security updates from iOS on Apple devices. This led to a drop in ad revenues and the stock has not been able to recover. Shares of Snap fell by 31% in the back half of the year and have been nearly cut in half from the 52-week high price of $83.34.
4. Buzzfeed (NASDAQ: BZFD)
A relative newcomer to the public markets, Buzzfeed went public in early December of 2021. Unlike Reddit, Buzzfeed chose to go public via a SPAC merger, and the stock has performed poorly in its first month of trading. Shares have fallen 46% in the past month, and the hope is that its performance does not have a negative effect on future media brand debuts.
Buzzfeed and Reddit aren’t exactly the same thing, but they are both sites where people head for news and information. Buzzfeed should definitely not be mentioned in the same sentence as a company like Meta Platforms or even Twitter or Snap.
Final Thoughts
Whenever Reddit hits the markets in 2022, we should see an interesting reaction from both retail and institutional investors. Will hedge funds blacklist the stock after what its users did during the short squeeze? Will retail traders buy the stock as another meme company they can support? I will be interested to see how much Reddit’s fundamentals and financial potential plays into how the stock trades. Reddit is a polarizing company in the financial world and I can see it being a battleground stock.
Personally, I won’t be investing in Reddit at its IPO. Generally speaking my strategy is to stand back and watch how new stocks trade for the first few quarters. I actually question how much Reddit can grow from where it is now and would love to see it become more profitable as a business. There is no doubt that the Reddit Stock IPO will be a highlight of the 2022 financial calendar!
