Experts urge caution as Reddit's IPO hits the NYSE, spotlighting its growth and AI data deal with Google
Reddit made its initial public offering (IPO) on the New York Stock Exchange this past Thursday, a move experts label as timely yet risky.
According to BNN Bloomberg, the social media platform is releasing shares at $34 each, with insiders already allocated 22 million shares. Greg Martin from Rainmaker Securities and Phil Young from Cidel Asset Management shared insights ahead of last week’s IPO.
Martin believes Reddit's IPO timing aligned perfectly with the market's current state, highlighting the platform's years-long preparation for this moment.
“I think that their investors need to monetize, and now is a really good time to go public,” he remarked, pointing to the buoyant market conditions. Despite Reddit's appealing initial price, Martin advises caution due to its high revenue multiples compared to competitors Snap and Pinterest.
Young views Reddit as an intriguing prospect for the IPO market, particularly given its active user base and growth potential. He notes, however, that Reddit's revenue per user lags behind other social networks.
The company's recent $60m agreement with Google to train AI models using Reddit posts signals a new revenue avenue. Yet, Martin expresses skepticism about the AI strategy's profitability, cautioning investors about the high valuation.
Both experts underscore the importance of cautious investment in Reddit's IPO, with Young highlighting the potential of Reddit's data for AI training and Martin questioning the sustainability of such a strategy in driving revenue.
As Reddit steps into the public market, it will focus on its ability to increase revenue per user and capitalize on its unique data assets amidst high expectations.
