Easily one of the hottest topics on Wall Street right now — besides artificial intelligence (AI) and cryptocurrencies — is the initial public offering of Reddit. A social news aggregator and online community network, Reddit (which will take the ticker “RDDT”) will likely attract eyeballs as a gauge for the health of the bull market. The RDDT stock IPO will also likely test the market’s appetite for similar public launches.
In 2021, during the peak of speculative market fervor, private enterprises contributed to 1,035 IPOs. However, just one year later, only 181 IPOs materialized — an 82.5% decline. Fundamentally, headwinds like rising inflation and escalating interest rates have stymied expansionary initiatives. Therefore, the soon-to-be launched Reddit IPO may act as a litmus test for other high-profile debuts.
With that said, here are seven things to know before you dive into the RDDT stock IPO.
7 Things to Know About the Reddit IPO
- While Reddit isn’t outright the most popular social media network, the platform has garnered intense loyalty for prioritizing anonymity. In addition, it features a unique upvote and downvote system that emphasizes user feedback when it comes to content visibility.
- The Reddit IPO will occur on March 21 and is eyeing a $6.5 billion valuation. Further, the company is hoping to raise up to $748 million in the deal, which will involve the sale of 22 million shares priced between $31 and $34 per share.
- Top users and moderators of the platform can get in on the RDDT stock IPO. According to The Verge, Reddit has taken the “unusual step” of setting aside approximately 2 million shares for users. Top Redditors who want to join the deal “have until March 18 to fund the purchase.”
- OpenAI CEO Sam Altman is Reddit’s third-largest shareholder ahead of the RDDT stock IPO. Per Business Insider, Altman may have about 1.66 million shares.
- Notably, March 21 won’t be the first time that the social network attempted to go public. Reddit’s first IPO attempt fizzled out back in 2021. However, insiders are hoping that the wave of generative AI can help the current RDDT stock IPO go through successfully.
- Although news about the IPO is splashed all across business headlines right now, not everyone believes the deal is an upside opportunity. Instead, quite a few retail investors are looking to short RDDT stock, in part because of monetization concerns.
- More than likely, the Reddit IPO will test the market’s desire to sustain risk-on investments. While names like Nvidia (NASDAQ:NVDA) have helped lift this raging bull market, there are questions about how long it can last. For instance, Bank of America recently noted that investors pulled $4.4 billion from tech stocks earlier this month, the “biggest-ever outflow.”
Why It Matters
Although much fervor currently surrounds the RDDT stock IPO, it’s entirely possible for the new listing to disappoint. Notably, Wall Street didn’t respond well to the public debuts of Instacart (Maplebear (NASDAQ:CART)) and Arm (NASDAQ:ARM) before they shot higher this year. If anything, prospective investors should be prepared for a choppy ride.
On the date of publication, Josh Enomoto did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
