Reddit (NYSE:RDDT) had a successful initial public offering (IPO) and first day of trading yesterday, with shares finishing up by 48%. The IPO price was $34, the high end of the target range between $31 and $34. RDDT stock began the day trading at $47 per share and ended the day at $50.44, equivalent to a market capitalization of about $9.5 billion.
The forum community platform sold a total of 22 million shares through the offering and raised about $750 million, of which it received $519 million.
The IPO also attracted the attention of Ark Invest’s Cathie Wood. Yesterday, the Ark Next Generation Internet ETF (NYSEARCA:ARKW) picked up 5,914 shares while the Ark Fintech Innovation ETF (NYSEARCA:ARKF) added 4,068 shares. That marks a total of 9,982 shares.
RDDT Stock: Cathie Wood Buys 9,982 Shares on First Day of Trading
Granted, the purchase was relatively small for Wood. This may signal that she is looking to scale in as the price settles and volatility decreases. Its also unknown whether Ark was allocated IPO shares at $34 or if it purchased shares at a higher price during intraday trading.
So, what exactly does Wood see in the company? For 2023, Reddit’s revenue rose by 20.6% year-over-year (YOY) to $804 million. However, profitability remains an issue, as its net loss was $158.55 million in 2022 and $90.82 million in 2023. Net loss in 2023 was mainly driven by $438.34 million of research and development expenses and $230.17 million of sales and marketing costs.
During the fourth quarter, Reddit grew its daily active users (DAUs) by 27% YOY to 73.1 million, the highest growth since at least Q1 2021. Logged-in DAUs grew by 21% to 36.4 million.
“The growth in global DAUq in the three months ended December 31, 2023 compared to the prior year period and prior quarter period was driven mainly by traction in our growth strategies, primarily from product enhancements and third-party search engine and algorithm changes,” said Reddit in its Form S-1 registration statement.
The company’s DAU growth resumed significantly during the second half of 2023. Now, it needs to figure out a way to become profitable.
On the date of publication, Eddie Pan 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.
