Social Media giant Reddit (RDDT) is set to make its Initial Public Offering (IPO) on the New York Stock Exchange on Thursday. The company is pricing its IPO stock price at around $34 per share. Many on Wall Street patiently await the listing in real-time as the stock's initial performance could be a signal of good things to come for various sectors.
UF Cordell Finance Professor and IPO Expert Jay Ritter joins Yahoo Finance to discuss Reddit's IPO on the NYSE and what it could mean for the IPO market moving forward.
Ritter elaborates on what could really be make or break for what's to come in the IPO market: "Fintech companies, Chime and Plaid... Rubrik, a cyber security company, are among those that are reported to be planning on doing an IPO this year. Given that the stock market is hitting record highs again today and the positive reception to these IPOs, I think we're going to see a continuing strong recovery of the IPO market this year."
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor's note: This article was written by Nicholas Jacobino
Video Transcript
RACHELLE AKUFFO: All right. Well, Reddit making its debut on the New York Stock Exchange today. Shares priced at $34. It's indicated to open even above that, between $44 and $48 per share. Now we spoke to Reddit CEO Steve Huffman earlier in the hour about the next chapters for the company.
STEVE HUFFMAN: Ads business today, and the core of Reddit, think of that as chapter one. And then, I think of chapters two and three as the user economy. And then, what we're doing on the data side.
On the data side, we've got almost two decades of human conversation about anything and everything. And so, in an AI world, where everything is increasingly written by AIs, the human-generated content actually becomes more valuable over time. And so, we're starting to see that the best response to artificial intelligence is actual intelligence.
RACHELLE AKUFFO: Well, the social media's IPO might be the bellwether for even more IPO activity this year. To break down what this stock debut might signal, we have Jay Ritter, University of Florida Finance Professor and IPO Expert. Thank you for joining us this morning. So as we heard here, that the path ahead with this pure play in Reddit as a social media company, their ads business, the user economy, and of course, data and all things AI as well. How do you think Reddit is set up with this IPO?
JAY RITTER: I think the company is in great shape. The company continues to grow. Investors, both retail and especially institutional investors, like to see growth, especially for technology companies where you've got certain fixed costs. Reddit's got a very high gross margin. So it can become very profitable, as it grows revenue.
RACHELLE AKUFFO: And of course, they mentioned their affinity program there. The CEO saying he wants, you know, users to be investors. Investors to be users. Do we get the sense, though, that the investors who are interested in Reddit are the users, because there was a bit of back and forth online among Reddit users saying, you know, that they didn't want to go ahead and get some of these IPO shares?
JAY RITTER: Well, there's differences of opinion among Reddit users. Some of them are going to be buying the stock and holding it. And others will be focusing on short-term patterns, trying to move the stock around up or down.
But institutional investors are going to be the important players. And they're looking at the company's future profitability, the potential there. Just like yesterday, when another tech company went public, Astera Labs, a computer hardware company, and got really positive reception. Today, it's trading at close to double the offer price yesterday. So I think both the positive reaction that Reddit is getting from institutional investors and the very positive reception that Astera Labs got yesterday, and is continuing to get, are really good indicators that institutional investors are very interested in a lot of the tech companies that are in the pipeline.
RACHELLE AKUFFO: So Jay, what do you think is going to make or break some of the success of the IPOs that are still to come this year? And what are some of the ones on your radar?
JAY RITTER: I'd-- fintech companies Chime and Plaid. Wayfair technologies. Rubrik, a cybersecurity company, are among those that are reported to be planning on doing an IPO this year, given that the stock market is hitting record highs again today. And the positive reception to these IPOs-- I think we're going to see a continuing strong recovery of the IPO market this year.
RACHELLE AKUFFO: And we'll certainly continue to track all that action. Appreciate you joining us this morning. Jay Ritter, University of Florida Finance Professor and IPO Expert. Thank you for your time today.
