Reddit's stock market debut on Thursday saw its value nearly reaching $9 billion, sparking a mix of skepticism and curiosity among users on its largest stock trading forums. Despite the company's lack of profitability, its shares surged 48% on the first day, closing at $50.44. The initial public offering (IPO) was priced at the top of its targeted range, $31 to $34 per share, raising $748 million.
Many Reddit users, especially on the "wallstreetbets" forum, questioned the future performance of Reddit's shares, with some looking into buying put options as a way to bet against the stock. Put options allow traders to sell a stock at a predetermined price, profiting if the stock's market price decreases.
The successful IPO, which has been in preparation for over two years, signals a resurgence in investors' interest in IPOs, following a period of aversion due to rising interest rates in 2022. Reddit made an unusual move by reserving 8% of its shares for its users, moderators, board members, and their friends and family, also extending the opportunity to clients of online brokerages like Robinhood Markets and SoFi Technologies.
Despite the IPO's success, discussions on Reddit have largely focused on the company's ongoing lack of profitability since its inception in 2005. This concern has deterred some users from participating in the IPO, citing insufficient information on Reddit's revenue-generating strategies.
Options trading for Reddit's stock is set to begin early next week on Nasdaq, with other options exchanges expected to follow suit. This move will provide an opportunity for investors looking to bet against the company's stock performance.
Reddit's prominence rose significantly during the "meme-stock" saga of 2021, where users on the "wallstreetbets" forum orchestrated a massive rally in stocks like GameStop, resulting in significant losses for hedge funds with short positions. Currently, the forum boasts over 15 million subscribers.
However, the general sentiment towards IPO investing remains cautious among Reddit users, with many high-profile stock market debuts underperforming compared to the S&P 500 in recent years.
