Shares of veteran social media company Reddit surged 48 percent on its first day of public trading, leaving some of the platform's power users and moderators with a nice windfall. After having priced its initial public offering at $34 - the upper end of the target range - Reddit shares climbed as high as $57.80 (plus 70 percent) on Thursday before eventually closing at $50.44. That leaves the company with a market cap of just over $8 billion. And while most pre-IPO investors weren't allowed to cash in on Reddit's IPO 'pop' due to a 180-day lockup period, some of the platform's most loyal users were. Reddit's underwriters had reserved 1.76 million shares to a selection of power users and moderators as well as to friends and family of certain employees, all of whom weren't subject to the lockup period. And sure enough, some users went to the infamous r/wallstreetbets subreddit to celebrate their windfall. "Got in. Got out. Like a fucking drive thru," one user said in a thread titled "Thanks reddit, i sold!".
Reddit's sizeable first-day ‘pop’ just one day after Astera Labs, a company making connectivity hardware for data centers, saw its share price jump 72 percent on its stock market debut, will likely be seen as a strong sign of life from the U.S. IPO market, which had lain dormant for most of the past two years. Before that down period caused by rising interest rates and a great degree of economic uncertainty, investors had come to expect a big first-day gain as part of a successful IPO. That is only one way of looking at it though. While a big IPO pop does in fact signify healthy demand, it could also mean that the offering was simply underpriced. After all, the ultimate goal of an initial public offering is to raise capital, not to make those buying into the IPO happy. Having share prices jump by 50 percent as soon as the bell rings, means that the offering company, in this case Reddit, has left money on the table as it could potentially have sold the shares for a higher price to begin with.
