Reddit users downvote stellar Wall Street debut

By Thomson Reuters Mar 21, 2024 | 3:19 PM

By Noel Randewich

(Reuters) – As Reddit’s stock market value soared to almost $9 billion in its Wall Street debut on Thursday, commenters on the social media website’s largest stock trading forums voiced skepticism about the outlook for the money-losing company’s shares.

“Where can I buy puts?,” asked user savage011, among the highly rated comments on Reddit’s “wallstreetbets” forum after the company and its underwriters priced its initial public offering at the top of the targeted range of $31 to $34 per share on Wednesday, raising $748 million.

Buying put options give traders the right to sell a stock at a fixed price, making money if the stock’s market price falls.

Reddit’s stock surged 48% in its first session on Wall Street, closing at $50.44 a share.

Its stellar debut – in the works for over two years – is the latest sign of improvement in investors’ appetite for IPOs after rising interest rates in 2022 turned investors risk averse.

Unusually, Reddit reserved 8% of the shares it was offering for users and moderators on its website, for certain board members, as well as friends and family members of its employees and directors. Courting retail investors, Reddit also shopped its IPO to clients of online brokerage Robinhood Markets and SoFi Technologies.

But recent Reddit comment threads about the IPO have focused heavily on the site’s lack of profitability since its launch in 2005.

“I ended up not taking part in the IPO. I don’t know enough about its plans to actually make money to invest in it,” commented user atdharris on Reddit’s “stocks” forum, which boasts 6.6 million users.

Investors hoping to bet against Reddit’s stock will get a chance early next week. Nasdaq plans to list options on Reddit starting Monday. Other options exchanges are likely to list contracts on Reddit at the same time or soon thereafter.

Reddit’s popularity surged during the “meme-stock” saga of 2021, when self-deprecating amateur traders collaborated on wallstreetbets to drive a massive rally in the shares of GameStop and other struggling companies, leading to deep losses for hedge funds that had bet heavily against them by establishing short positions.

Over 15 million users are subscribed to wallstreetbets.

Other Reddit users on Thursday were critical of IPO investing in general, with many of Wall Street’s high profile stock market debuts underperforming the S&P 500 in recent years.

(Reporting by Noel Randewich; additional reporting by Saqib Ahmed in New York, Editing by Nick Zieminski)