Reddit’s meme stock risk (2024)

FAQs

Will Reddit IPO be successful? ›

Shares of the buzzy social-media platform climbed 48% from their IPO price. Shares of the social-media platform Reddit surged in their stock market debut Thursday, a sign of strong investor appetite for a company that has yet to profit and operates in a highly competitive industry.

Reddit notched its second-highest close since its IPO in March after retail traders kicked off a meme stock frenzy on Monday. “Roaring Kitty,” the man who inspired the meme stock mania of 2021, resurfaced online this week.

Reddit (RDDT)

Reddit stock is not a buy right now. Potential investors should wait for the stock to form a new base before purchasing shares.

Can I make money with a meme stock? Speculative investing can lift the value of meme stocks quickly—offering the opportunity to make money. But all bubbles tend to burst, causing prices to drop suddenly, meaning you could make a loss or be left holding the bag if you don't sell at the right time.

As for retail investors, whether or not you buy the Reddit IPO boils down to your own personal investing goals and risk tolerance. If you do decide to buy Reddit stock when it first begins trading, do so in a small amount that you can afford to lose.

The company's initial public offering (IPO) price was set at $34 per share — indicating a market value of $6.5 billion. This beat previous estimates for the platform, which had pegged Reddit's valuation at around $5 billion — about half of Reddit's estimated value from a 2021 private funding round.

Advance remains the largest shareholder in Reddit, with a 30.1% ownership of the company, according to securities filings.

Reddit Inc. shares notched their largest one-day drop since the social-media company's trading debut after Hedgeye Risk Management released a report adding it as a short idea and saying it should fall about 50%.

Why did Reddit stock go down? ›

The research firm has identified Reddit as a short idea, arguing that the recent rally left the stock's price "overvalued." Hedgeye predicts a 50% plunge in Reddit's stock from its initial public offering (IPO) price, citing concerns over the company's lack of long-term ability to expand into international markets due ...

Advance Publications owns 42.2 million shares of Reddit, worth more than $2.1 billion after the IPO. Condé Nast had acquired Reddit for $10 million in 2006 before spinning it out in 2011. OpenAI's Altman, who owns or controls about 12.16 million Reddit shares, has a stake currently worth $613 million.

A meme stock refers to the shares of a company that have gained viral popularity due to heightened social sentiment. This social sentiment is usually due to activity online, particularly on social media platforms. These online communities can dedicate heavy research and resources toward a particular stock.

The retail investor-led trading frenzy that reignited interest in the “meme stocks” of 2021 looked to have cooled by Thursday, as shares in GameStop and AMC Entertainment Holdings retreated. Robinhood stock still looks like a winner.

Robinhood (NASDAQ:HOOD), the social trading company, couldn't be missing from a list of meme stocks to buy. Involved in the previous meme stock rally of 2021, HOOD has seen increased interest over the past week.

Reddit's IPO raised roughly $750 million last week for the company and existing shareholders. Investors were monitoring Reddit's stock debut to gauge whether the IPO market might pick up after a long lull spanning 2022 and 2023.

The company itself plans to earn around $450 million as part of the IPO, according to CNN. While Reddit doesn't make money, it has touted it is growing. The site has around 72 million active users a day, a jump from 52 million active users in 2021.

Reddit and selling shareholders raised about $750 million from the offering, with the company collecting about $519 million. The stock opened at $47 and reached a high of $57.80, marking a 70% increase at its peak for the day. It closed at $50.44, giving the company a market cap of about $9.5 billion.

Reddit Sees More Than 20% Sales Growth in 2024 as IPO Looms

Revenue in 2023 grew to $804 million, according to its filing with the US Securities and Exchange Commission.