This is breaking you loose from the Bloomberg.
Hey, everybody, I just want to do a quick check on shares of Reddit. They are open, they are trading, and the stock is app just shy of sixty percent at its highs today was trading above almost fifty eight dollars this share, So a seventy percent pop on this first day of trading.
It's settled in or it's not settling in.
We still have some ways to go, but right now up about fifty nine percent, fifty four dollars and change here if you will, so jumping after we know at priced at the top of its marketed range.
And this is coming day two.
We've had two big tech IPOs that have all come out of the gate incredibly strong.
And we know.
Astera right, the semiconductor related company. It's also trading higher in a second day of trade.
So that brings me to Amy or who covers IPOs here at Bloomberg. She's in our studio right now.
Amy.
If you're if you're maybe one of the bankers or perhaps working at Reddit, and you see a sixty percent pop on day one of trading, how are you feeling? I mean, it's good obviously if you're a shareholder, but are you also thinking, wait, we could have raised more than seven hundred million dollars in.
The IPO, so I just want to go back to the marketing bid I have to say. So eight Reddit is not raising all the money, so the money that it will probably gets around five hundred and fifty million or so because it's also some of the employees are selling, but also this is the biggest marketing event, so they
don't really have to go out. So essentially, for a lot of people there's been concerned about like, oh, there is a generation of redditors, and then the younger people do not know it because the younger people already into TikTok and other things. But this is going to introduce a lot more people.
To because of the IPO.
Because of the IPO, but going to bankers or just issue is in general, so normally people will feel left out right leaving money on the table. But we're in a totally not normal IPO environment right now. So anything really anything up and having a pop to investors is great for every Well that's.
What I was wondering.
How much of it is, like, oh my god, there's another IPO. Finally, versus Wow, I really like this company.
Well it finally, it really depends on investors. And I have to say the market is very concentrated in tech at the moment, not on individuals like individual other sectors like industrial healthcare, like, we haven't actually seen those rebounded to the point where we've seen a whole slew of IPOs in those sectors as well. So it's really up to investors to decipher themselves whether they like it because the momentum is there or because the fundamentals are there.
So at the end of the day, IPOs are buying into growth, right, and growth is really about projection and whether you actually believe in the company. So everyone has different kind of viewpoint about that.
Right, And I have to say that you throw AI kind of in the AI play and the data like that certainly makes it a little bit more of an interesting story.
Tim Hey, it certainly does. Man deep when you think about comps for this company, what's a fair comp.
Well, Snap, Pinterest, Meta, I said, you know the fact that Meta is trading as such a premium to the smaller social media players. I thought that was something.
Was trading against a pinterest for example.
So pinterest trades for example, at about four times ev doo sales. Meta is close to eight times EV two sales, and Reddit was priced right in the middle. They're thirty
four dollars equated to six times EV two sales. So that's why I think the pop gets now it's closer too, Yeah, dollars a share a little higher than that, Yeah, and which is why you pay for growth, And I think with Reddit accelerating growth in the past six months, it just makes a strong case that they should be at a premium multiple.
I just want to remind everybody who's watching and listening around the Bloomberg universe that Reddit shares they are definitely up in trading stocks up about almost fifty five percent here in its first day of trade, trading above fifty two dollars this year. It is the fourth largest this year. The biggest of those listings though, that we've seen so far, was the amur Sports one that we had in January. And I want to go back to you because there
you are in the heart of Silicon Valley. Reddit a company well known in the valley around for a long time. Has there been much buzz in conversations around this company, like Wow, this could be like Reddit's time. I'm just curious what the conversations, if they've even been happening.
Yes, specifically, last night, Sequoia, which is one of the biggest bench capital firms, held a really big AI event called ai Assent, and they were talking about Reddit.
There.
They had like one hundred CEOs and founders from the biggest AI companies all in one room. But again they went back to the point of the data licensing and just like man Deep said, and man Deep, I'm paraphrasing, but I think you would be happy that I'm quoting you. You know, Mandeep says, I bet you that Reddit will go to the other LM builders, big and small and
do a deal. And I think that's the conversation that a lot of the kind of tech world is having out here, that Wow, Reddit's kind of got its story straight and got it right, and if they can do two hundred million with Google, they'll probably be able to replicate that. And then the other part of it is I'd just go back to like, Reddit is a part of this town. You know, it was a y combinator startup in two thousand and five. That's a you know,
very well known incubator here in the city. It's sold in two thousand and six to Conde Nast, and it's kind of had this kind of strange and long journey, but it's still been a name in the world of technology that we talked about long. Katie Greifeld should be here,
she would back me up on this. But long before Wall Street bets and bets and the memestock frenzy, we did know about Reddit to some extent, right, So, while I've been saying that the kind of global audience for Reddit might not be there yet, it is well known to those in the technology community at least.
Yeah.
At the same time, ed, it is on a fully diluted basis evaluation right now, just shy of ten billion dollars on it, Yes, just shy, just shy. But in terms of market cap right now about eight point two billion dollars. Talk to me a little bit about the what happened a few years ago when they raise money at a ten billion dollar valuation, because we're still not you know now, we're still just around that point two or three years later.
So in twenty twenty one, in the last private round that they did, they had a ten billion dollar valuation, so they're not quite there yet. You know, the cat table was probably quite complicated, and I guess that you could ask yourself, well, are there people on that cat table who are either in or out of the money?
But I think we talked about this a bit earlier that if you think about the last three or four years, there are a number of companies that are now public that chose to do down rounds, in other words, raise money at a lower valuation than the valuation of their previous round, and they did that to give themselves some upside, right. You know, imagine if Reddit had retained that value and you know, we're now valuing it at five billion or even higher fifteen billion. But Reddit didn't have to go
through that process. It's just the reality of the time and place that you're in. And you know, Amy will know the history of this, but you know, Reddit was going to do this in twenty twenty one, and then it was going to do it in twenty twenty two, and we've kind of been waiting a long time. And twenty twenty one was this like massive USIPO year, particularly for tech, where they kind of missed the boat. So there is a part of it that's just like confidence
in timing. But the valuation is comparable right in this moment to where it was in that last private round.
I have to say that, actually, it's very funny ed you mentioned the last funding round of A Funny Guy, because in the perspectives in cr for A Series E and Series F where ten cent Contees and Sam Oltman actually participated, we were thinking, like, yeah, for the price range of thirty one dollars to thirty four dollars, like they're going to make a loss because the average price was like thirty seven or forty two dollars, So like at fifty dollars right now, So they're all making money,
even the people who participated in the last round at a valuation of ten billion dollars.
Pretty remarkable, right, it really is.
Okay, Mandy, if you're if you're doing ads sales for Reddit, how do you go out there and convince a large marketing, a large marketer to spend money with you versus with meta platforms which can which would tell you, hey, we know exactly who the next buyer of your product is going to be.
Yeah. One of the trends that we are noticing with lllms is the ad targeting will get better and better. And you've seen that in Meta's latest results. You said LLMS, yes, because you know what LMS give you is more persons, large angrid models, and that's what Meta has their own large anglid model called LAMA. I mean, others are standardizing on GPT and Gemini will probably show up in Apple. But the point being that you will see an expansion
in search because of LLLMS. So not only do you ask a query, you can ask a follow up, and when you ask a follow up, you give more information to the channel you're asking the query, whether it's a chat pot or Reddit or any Google search. And with a follow up you have the proposition of showing even
more targeted AD. So Reddit has that engagement in terms of the user base looking for user generated content where you know all that is original to Reddit, and if they can build a search platform, the ad targeting can be huge, much better than any other platform.
I'm just going to say, I'm curious as Reddit users start to hear that, it just seems like if I was a Reddit user, I'm not, but it seems like it's a platform where they wouldn't love that.
I think it's kind of their own little space that they go into.
So I wonder if there's pushback going forward, just to reset everybody Reddit shares up in trading their now below fifty dollars a share. So we've seen certainly a lot of volume, a lot of activity. Stuck still up forty
five percent in its first day of trading. The Reddit IPO so again forty nine and change with us at Ledlow, co host of Bloomberg Technology on Bloomberg TV, who spoke with the Reddit coo earlier today, Amy or in the hand, equity capital markets reporter at Bloomberg News, and man Deep Singh also with us in studio, senior tech industry analyst at Bloomberg Intelligence.
Tim We want to add another name to this Roundtanel.
Yeah, because we have with us the person who wrote the book about Reddit that came out back in twenty eighteen. Back with us is Christine Logorio Chaffkin, Editor at Large at INC Magazine, also the author of We Are the Nerds, The Birth and Tumultuous Life of Reddit, the Internet's culture laboratory. Christine. By the way, we should note if her last name sounds familiar, it's because she's the wife of Bloomberg BusinessWeek's Max Chafkin. She was at the New York Stock Exchange
a little earlier today. Right now, joining us from her office in New York City. Christine, Welcome back to Bloomberg Business Week a day like today. After writing a book about the history of Reddit. What is Reddit today versus Reddit in its early years?
Wow? Yeah, it's a very very different company, right.
I mean, you're talking about the viability of selling advertising or talking about selling you know, language two large language learning models and selling their basically AI companies being a big customer.
That was unheard of ten years ago.
It was also unheard of for Reddit to really be a mainstream news source ten years ago. It was really a kind of dark corner of the Internet at that point, with a lot of pornography, a lot of a lot of heat speech. And it's been a remarkable journey that it's been through to kind of clean up that make its content modern, content moderation modern, and it's become sort of a model for that.
Well and such. It's a long way, it sounds. Take us to the Exchange earlier today, you were down there, tell us about stuff SNeW and what else the activity was at the New York Stock Exchange as it got ready to debut.
You know, I walked into the lobby of the Stock Exchange and there's just a stuffed SNeW which is a little round alien that is the company's avatar or mascot. And I saw a security guard sort of coup at it, which was very cute. But then ringing the bell on the floor at nine thirty am was not CEO Steve Huffman. It was a human I assume, in a like large stuffed snooze suit, which I think, you know, it was sort of meant to stand for every man, not a
dark place anymore. Huh yeah, yeah, it was very cute, you know. I mean so, I think they're trying to appeal to their core audience as well as investors, right, they need to keep their users happy at the same time as they've gained a lot more shareholders.
Hey, talk to us a little bit about that balance, Christine, because you know, it's not necessarily Reddit's not necessarily a place.
You know.
Look, there's a niche for everything on Reddit. I think it's fair to say, but the attitude of the users is not certainly one of one percent supportive of this company going this route. So does how does Reddit walk that line and keep that balance?
Yeah, no, absolutely, users are are quite skeptical. There are you know, hundreds of thousands of posts on the site from users expressing skepticism. What happens when Reddit needs to make more money, does it start charging us? Does it start you know, does the selling of the content start to become something that inhibits more speech on the site.
You know, there's a lot of skepticism, and it is very important for Steve Hoffman and the other executives that read it to listen to those sentiments and keep users happy. He did say in an almost ame earlier this week that you know, he does listen to users and that site revolts such as the one that happened last summer are very valuable to him and our learning opportunity because you know, the users are the bread and butter. They need to keep growing those users, to keep growing those
advertising money. Advertising is still their primary and they said in the s one they're they're really only way of making money right now. So it is it's very very important. He really wants to get a rebellion users, and they need to keep the site very very friendly and growing point those sort of user revolts in the future.
Well, that's what I was trying to get to earlier with Ed Lulow. I want to go back to you or listening to Christine, but this whole idea of kind of what this this site has been like. And I know they've cleaned up some stuff, but I do wonder, like, what is that balance of bringing in advertisers. Mendeep earlier talked about their already bloated cost structure that they maybe need to work on that, but also they need to
raise their user base. I mean, there's a lot of things that they're going to be juggling now as a publicly held company.
The notes was published twenty eighteen. I think I'm right in saying, but that's like a really interesting year because that was the year that Jen Wong joined, right, And I'm sorry to keep going back to her. It's not just that I interviewed her earlier, but like, I think a lot of people would credit Jen Wong with operationalizing
Reddit and making it into a proper business. And by the way, she's like a really significant shareholder more than two million of the shares outstanding, more than Steve Huffman as it stands, because he has a complicated comp package. And I just wondered if you could reflect on what you think the tipping point was in Reddit growing up as a company a little bit because it was so influenced by the community, right, you know, the moderators, moderate Christine come on in on that.
Yeah, yeah, I do, I mean, I do think that there was this really interesting moment when do you remember back when Ellen Power is briefly CEO.
She was interim though, right, that was on an interim basis.
She I think everyone intended for it to last, and she, you know, literally got harassed out of the role by users. But what she did, this very important thing, is she basically isolated and cut off or started to cut off five different communities that were just full of hate speech on Reddit. And it was super controversial at the time, and it has since over the past decade, become a
thing that Reddit does all of the time. You know, Reddit now has a whole set of rules and a whole different structure of moderators that was influenced by that very first that you know, back then, researchers found that just elimiting those five communities had a really interesting trickle down and eliminated it slowed hate speech throughout the entire site. I mean that was I think this turning point. I think hiring a more advanced salesforce, hiring chen were also
very important, you know, steps for the company. But it's it's still you know, it's still a work in progress. And any site that relies on a community of unpaid moderators, you know, like Reddit does is it's going to always be a battle, right redd it only has what some thousand employees.
Hey, listen, everybody, just a quick check. Our roundtable discussion will continue in a moment. But Reddit share is still up about forty six percent here in the session. At their highs there were almost fifty eight dollars a share, that was a seventy percent gain on its first day of trading. Still up, as I said, forty six percent the stock closing, I mean stock trading forgive me just under fifty dollars a share, So still quite a pop. Amy or is still with us here at Bloomberg News
watches the IPO market. I mean safe to say we still have what a couple of hours to go before we wrap up this trading day. But right now it looks like a pretty successful ipo.
Looks like it, and I'm sure that a lot of bankers are really happy about it because given that over the weekend it was the message was kind of like confusing because it was four to five times book. When people were seeing like four to five times book, it was not a good book just generally, and there was talk about like now coming into the beginning of the week and then especially just before prizing, the book cover
was more than thirteen times covers. So essentially there's a great ramp up and especially from long only funds, and that's why, Yeah, it's been holding up pretty well.
You see the momentum, all right. As we said, we're talking with Christine Lagorio. Chafkin wrote a book about Reddit, We Are the Nerds, The Birth and tumultuous life of Reddit, the Internet's culture laboratory. Also still with us is our own ed La Low, co host of Bloomberg Technology, and
Amy Or who watches the IPO market here at Bloomberg. Christine, I want to go back to you as you think about this company, you know what it's in a you know, they're coming public in a market where there's some really big players out there, and I get the AI data play, and that could be a lot of potential for them, But what do you see is their biggest challenges going forward? Having done this deep dive in your book into the company and into its history, yeah.
I think this transition into into AI is going to be challenging, both as a perception and in reality in a sales reality. But let me just say that Steve told me so. I did speak to Steve earlier today as well, and he told me something really interesting, which was that, you know, this long road that they've had to IPO, they filed first and talking.
About Steve have been the CEO of the company.
Yeah, it's got to Steve Hoffan earlier this morning, and you know, he said, basically, they've been doing earnings calls since then. They did five different rounds of meetings with investors before they even did their roadshow. So by the time they got to the road show, he said, like everyone sort of knew the business so well and didn't have as many questions as he expected, which you know, if you know ready, you know Reddit requires some explanations.
So I thought that was a kind of interesting detail. But I think the AI thing is very interesting and it's a challenge, but it's also I mean, as AI starts to shift to the Internet and the way we interact with search, I have been noticing more of my peers are searching, say Google, with the word reddit dot com in it, so that they get a real human response to their querry instead of getting an AI generated response. I think you can stand to benefit from the growth of AI, not just from a salesforce.
Aingle, because you're arguing, Christine, that we could be desiring something that is more human in a world that is dominated increasingly by answers generated by AI.
Yeah.
Absolutely, Okay, so let's talk.
A little more because Ed Ludlow spoke earlier to Gen Wong, the COO of Reddit, all about the way that Reddit could use AI as a business model in terms of training using its content to train AI models. Christine was even in the research that you did for your book, which again was published in twenty eighteen, was that even on the radar of folks that read it back then?
Hey, I gosh, I do not think it's nothing that I talked with them about. I do have to say, I mean, at that time, Sammon was still on the board of Reddit, but he was and he had founded chat GBT, but he was not like you know, in the press about it yet and it was not working on it full full time yet.
So no, it's something we really discussed.
All right, guys, just got about a minute and a half left here. I want to go round Robin as we get ready to just wrap up this hour here, Amy or watching this IPO thirty seconds here on what you're thinking?
I think read it went public at the right time for the company. It might talk it might have took it eighteen years for it, but then it became profitable in the fourth quarter, and that gave investors a lot of confidence.
What do they always say?
It's always bad timing, right place, right time, And Ludlow, what are you thinking? We're going to continue obviously the coverage here on Reddit and broaden out here, but what are you thinking here?
You've been following this one.
Very yeah, for the last six months to two years. Everyone has an AI story, and I just feel like Reddit got their AI story right and at the right time, and it answered a lot of questions and concerns that people had about the legacy advertising of call it. Legacy is pretty much brand new for advertising business. And so let's see where they trade any year's time. That's the fun of the market page.
Christine, just thirty second, last thirty seconds to you. The book is called We Are the Nerds, The Birth and tumultuous life of Reddit, the Internet's culture laboratory. Where are we in reddits life now?
Yeah, we are entering a new chapter of reddits Lives. You've have been this morning called me.
He's very excited to and an honored to be a public company now. He said that, you know, looking back to other great public companies, you don't even remember their time as a private company. The iPhone was not made by a private company. And so he's he's excited for
the next chapter. I think that there's a lot to watch in terms of this stock to watch to see if anyone takes out money, watch to see who you know, who is you know who's who's buying their AI message was at the right time and it is going to be an interesting component toad to wrap.
Thank you so much, Amy or Ed Ludlow and Christine Lagorio Chafkin, thank you so much. Here's a Reddit folks at fifty percent dot closing above fifty dollars a share. Carol Master Tim Stenevic.
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