Reddit's IPO at one week: how it compares to other social media IPOs

While Reddit's had the second highest IPO price, it raised by far the least amount of money

Of all the things the pandemic had a big impact on, one of the least mentioned is the tech IPO: there was not a single notable tech IPO for over 18 months following the December 2021 debut of  software vendor HashiCorp. In fact, only 10 companies raised $100 million or more in initial share sales in the first six months of 2023, compared to 517 companies in the first half of 2021. That's how bad it got.

Now, finally, we seem to be pulling out of the slump. Instacart went public in September, raising $660 million, and last week Reddit, which announced it had submitted a draft registration for a public offering all the way back in December 2021, finally hit the market as well, raising $748 million.

The Reddit IPO is also notable because social media IPOs are fairly rare; in fact, following Facebook IPO in 2012 (still the largest tech IPO ever), only four others have followed: Pinterest, Snap, Twitter (which is no longer a public company since its purchase by Elon Musk in 2023) and now Reddit. The other social media company to go public was Donald Trump's Truth Social, which entered the market via SPAC earlier this week. 

The list of comparables may be short, but they might tell us something about what to expect for Reddit's performance going forward. 

• IPO price

Reddit's $34 IPO price is the second highest of all the companies, behind only Facebook's $38 pricing. Meanwhile, Twitter priced its shared at $26, while Pinterest was priced at $19 and Snap at $17. 

• Amount raised

At the same time, Reddit also raised by far the least amount of money of any of these companies, with $748 million, or less than half of Pinterest's $1.6 billion and Twitter's $1.8 billion. That's not even coming close to Snap's $3.4 billion, let alone Facebook's record breaking $16 billion. 

• Initial opening (percentage from IPO price)

All of the companies that went public opened higher than their IPO price, the highest being Twitter, which opened up 73% at $45.10, while the lowest was Facebook, which opened up 10% at $42.05.

Reddit opened up 38% at $47, which was lower than Snap, up 41% at $24, but higher than Pinterest, up 25% at $23.75.

• Closing at first day (percentage from opening/IPO price)

In the end, Reddit had the most successful first day of any social media company yet, ending trading at $50.44, up 7% from its opening price, and 48% from its IPO price.

That's higher than Snap, which ended up 2% from opening price, and 44% from IPO price at $24.48, and Pinterest, which ended trading at $24.40, up 3% from opening price and 28% from IPO price. 

Both Facebook and Twitter ended their first days down from the initial opening: Facebook dropped 9% to $38.37, and Twitter landed at $44.90, down 0.4%, but they also both ended up from their IPO prices at 1% and 73%, respectively. 

• Closing at one week (percentage from first day closing)

At the end of their first weeks, all but one company ended up down from the closing of their day of trading: Pinterest, which closed at $28.80, up 18%.

Reddit wound up at $49.32, down 2%, while Twitter ended its first week at $44.69, down 0.5%. At the end of one week Snap was trading at $22.71, down 7%, and Facebook dropped to $31.91, down 17%.

Reddit's potential 

So what does this all tell us? In the end, not that much, simply because nobody can truly tell what's going to happen, of course. If you looked at Pinterest and Facebook at one month, you'd have different ideas about where they'd eventually wind up.

One month after Pinterest's first closing day it was up 9% to $26.70, but a year after its initial closing it was down 55%, having dropped to $10.92. The stock has since rebounded, ending trading on Thursday at $34.67.

Facebook, on the other hand, was down 18% at one month to $31.41 a share, and after its first year it was down 32% to $26.25. Cut to now and it's trading at $485.58, up over 1,100% from its IPO price. 

At one month these two companies looked like they were going in opposite directions, with Pinterest riding high and Facebook faltering, but Facebook has since soared while Pinterest has had much more moderate success. 

(Image source: verdict.co.uk)