One of the most eagerly awaited initial public offerings of 2024 was Reddit (RDDT). On Thursday, March 21, Reddit listed RDDT shares on the NYSE. RDDT closed at $50.44, a jump of almost 48% over the issue price.

Reddit, Inc. (Reddit), a community of communities, had filed a Form S-1 registration statement with the United States Securities and Exchange Commission in connection with a proposed initial public offering of its Class A common stock. Reddit proposes to offer its Class A common stock on the New York Stock Exchange (NYSE) with the ticker name RDDT.

The company is selling 15 million shares (a portion from a total of 22 million) to raise up to $519 million from new investors.

8% of the shares (1.76 million shares ) offered in this IPO are available to eligible users and moderators on the platform through a directed share program.

The news was that Reddit’s initial public offering was four or five times oversubscribed before the listing, as reported by Reuters.

There have been at least two major developments related to Reddit IPO after the prospectus was filed with US SEC.

Reddit has recently updated its risk factors as carried in the original prospectus. This is what the company says – “On March 14, 2024, we received a letter from the Federal Trade Commission (the “FTC”) advising us that the FTC’s staff is conducting a non-public inquiry focused on our sale, licensing, or sharing of user-generated content with third parties to train AI models.

Given the novel nature of these technologies and commercial arrangements, we are not surprised that the FTC has expressed interest in this area. We do not believe that we have engaged in any unfair or deceptive trade practice.

The letter indicated that the FTC staff was interested in meeting with us to learn more about our plans and that the FTC intended to request information and documents from us as its inquiry continues.

Regulatory engagements can be lengthy and unpredictable. Any regulatory engagement may cause us to incur substantial costs, and it is possible for any regulatory engagement to result in reputational harm or fines, cause us to discontinue or modify our products, services, features, or functionalities, require us to change our policies or practices, divert management and other resources from our business, or otherwise adversely impact our business, results of operations, financial condition, and prospects.”

In addition, there’s another disclosure made by Reddit to the US SEC – “On March 18, 2024, Nokia Technologies sent us a letter indicating they believed that Reddit infringes certain of their patents. We will evaluate their claims.”

Julia Khandoshko, CEO at international broker Mind Money addresses the question on investors’ minds – What do investors need to consider regarding this IPO? Will it boom? Here’s what Khandoshko says, “Concerning the stock price of Reddit, the average investor’s focus extends beyond mere valuation. Key considerations revolve around share allocation—the number of available securities and their distribution—as well as the lock-up period governing the timeline for selling securities. Stock dynamics also factor into investors’ deliberations, overshadowing the company’s initial valuation.

While expectations loom for low allocation and oversubscription, indicative of high demand, the overall success of the Reddit IPO remains uncertain to me. Despite the potential narrative for investors to capitalize on, I do not anticipate the triumph of this March’s accelerated IPO, especially against such high interest rates.”

Here is what the Reddit users or Redditors are discussing about the IPO