Reddit investors shrug off hold rating, bid up stock another 9% as post-IPO rally continues

Reddit’s
first
stock
rating
among
analysts
was
a
hold.
But
the
rally
continued
anyway.

The
shares
climbed
8.8%
on
Tuesday
to
close
at
$65.11.
They’re
now
up
92%
since

debuting
on
the
stock
market
last
week
under
ticker
symbol “RDDT.”
It
was
the
first
social
media
IPO
since


Pinterest’s
offering
in
2019.

Reddit
and
existing
shareholders
sold
22
million
shares
in
the
offering,
raising
almost
$750
million
combined.
Over
35
million
Reddit
shares
changed
hands
on
Tuesday,
the
most
since
48.7
million
shares
were
traded
on
the
company’s
opening
day
on
the
market.

Investors
continued
to
snap
up
Reddit
shares
despite
New
Street
Research

issuing
a
neutral
rating
on
the
company “after
the
stock
goes
to
the
moon,”
analysts
wrote
in
a
note
published
on
Tuesday.

The
analysts
said
they
wouldn’t
change
their
$54
price
target,
and
that
they
expect “volatility
into
the
first
earnings
report.”
The
company
hasn’t
scheduled
its
announcement
yet,
but
New
Street
said
it
will
likely
come
in
May.
Insiders
are
forbidden
from
selling
shares
until
the
post-IPO
lockup
period
expires
180
days
after
the
offering.

The
New
Street
analysts
wrote
that “an
OpenAI
data
licensing
win
is
baked
into
the
stock,”
implying
investors
see
Reddit
benefitting
if
it
inks
a
licensing
deal
with
the
ChatGPT
maker.
Investors
expect
such
a
deal “to
be
added
soon,”
they
wrote,
considering
OpenAI
CEO
Sam
Altman
owns
a
significant
stake
in
Reddit.

The
company’s
market
cap
has
swelled
to
about
$12.3
billion
as
of
Tuesday’s
close.
Altman’s

shares
are
worth
almost
$800
million.

Although
Reddit’s
core
business
is
online
advertising,
the
company
has
pointed
to
data
licensing
as
a
potential
big
revenue
source.
It
also
recently
entered
into
an
expanded
partnership
with


Google,
allowing
the
search
giant
to

access
more
Reddit
data
to
train
its
AI
models.

However,
the
Federal
Trade
Commission
is
conducting
an

inquiry
into
Reddit’s
data
licensing
business.

“At
first
blush,
it
seems
relatively
benign,
but
it
could
be
an
overhang,”
the
New
Street
analysts
wrote,
noting
that
the “FTC
inquiry
could
slow
the
pace
of
new
deal
signings
and
will
certainly
require
attention
and
time
dedicated
to
addressing
the
inquiry.”

Meanwhile,
some
Reddit
users
took
to
the
company’s
subreddits
on
Tuesday
to
discuss
the
stock
rally.
A
number
of
users,
along
with
certain
company
employees
and
their
family
members,
were
part
of
Reddit’s

directed-share
program
and
not
subject
to
a
lockup
period,
allowing
them
to
collectively

make
millions
of
dollars
by
selling
after
the
pop.

One
Reddit
user
with
the
username “bkarp00”

wrote, “Looks
like
all
the
quick
cash
IPO
people
out
are
helping
it
rally
today
with
less
people
willing
to
sell
at
these
levels,”
referring
to
shareholders
who
believe
that
Reddit’s
stock
will
continue
to
increase
in
value.

User “IrishRun”
wrote, “I’ve
been
kicking
myself
for
not
buying
more
shares,
but
there
was
no
guarantee
I
would
have
received
the
requested
number
and
then
I
would
probably
still
be
wishing
I’d
bought
more.”