Why Reddit Stock Soars in IPO Today

reddit (RDDT 48.35%) Stocks showed explosive gains on the first day of trading. The company’s shares ended the daily session up 43%, according to data from S&P Global Market Intelligence.

Reddit had an initial public offering (IPO) and began trading on the stock market this morning, trading on the rise. The company priced its stock at $34 per share, but the stock actually started trading around $47 per share, reaching a high of $57.80 earlier in today’s session. At its peak, the company’s stock price rose 70% from its IPO price.

Reddit stock shocked with its public debut.

The much-anticipated public debut of Reddit stock has finally happened, and it’s been a huge success for the company. The social networking site raised about $519 million through a stock sale, and post-market stock gains lifted the company’s valuation to about $7.6 billion. While this is still lower than the roughly $10 billion private valuation the company earned a few years ago, the appetite for the stock is clear, and the company’s future moves could help boost the stock price.

What’s next for Reddit?

Last year, Reddit’s revenue grew 20% annually, reaching $804 million. Meanwhile, the business posted a net loss of $90.8 million, down from a loss of $158.6 million in 2022.

Like many other social media companies, Reddit’s core business revolves around advertising. But the company is looking to expand other revenue-generating channels. As stated in the S-1 filing the company filed ahead of its public debut, Reddit plans to focus more on transforming the network into a development and content creation platform.

The company also highlighted opportunities in artificial intelligence (AI) and data licensing. Check out the following quote from the company’s S-1 filing:

As the world becomes increasingly data-driven, we deliver solutions that focus on people and experiences. We expect that data advantages and intellectual property will be key elements of future LLM education.

Investors probably won’t have to wait long for the company’s data licensing plans to start bearing fruit. The company said it has signed licensing deals worth $203 million over the next two to three years and expects to record at least $66.4 million of that revenue this year.

Reddit has a large and engaged user base, but has struggled to monetize it in the past. If data licensing can be leveraged as a major new revenue stream, the stock price could soar beyond current levels.