Reddit Shares Soar in Long-Awaited IPO

It’s the second IPO of the week to jump in its first day of trading, a welcome change after two years of choppy reception for new issues. Shares in technology company

rose more than 70% in its debut Wednesday. Success tends to beget success in the IPO market, with a string of high-performing IPOs typically encouraging investors to place orders for other new companies coming to market.

Reddit priced its IPO at $34 a share Wednesday, at the top of its anticipated range. When it began trading Thursday afternoon, its shares opened even higher, at $47 a share, and reached a high of $57.80 during trading. Astera Labs, which makes semiconductor-based products, had priced its IPO two dollars above its targeted price range.

While there have been some big debuts since the U.S. IPO market seized up in late 2021, few have been definitive successes, at least at first.

British chip-designer

and grocery-delivery company both debuted in September. They initially traded higher before their stocks subsequently teetered. They’re both now trading well above their IPO prices.

Private companies weighing 2024 offerings include healthcare-payments company Waystar and cybersecurity company Rubrik. Some of the marquee IPO candidates such as fintech-company Stripe and tech-company Databricks plan to wait until at least 2025 to go public. 

It has been a long road to an IPO for Reddit. The company went from being seen as an obscure corner of the internet to one of a handful of influential social-media companies.

The nearly 19-year-old company filed paperwork to go public in late 2021, but as tech-stock valuations began to slip, it put off those plans and began focusing on ways to improve its financial health. At its IPO price, Reddit was valued at around $6.4 billion, down from the $10 billion valuation it netted in a 2021 fundraising round. 

It now boasts roughly 73 million daily users and more than $800 million in revenue, but has yet to turn an annual profit. The vast majority of revenue comes from advertising, though Reddit is trying to branch out beyond ads to make money. Last year it launched a data-licensing business, and the company recently announced that it reached its first major deal with Google.

Reddit’s IPO is the first for a social-media company since

’s 2019 public debut. Though still dwarfed by Snap and , Reddit has seen its cultural significance expand as its users dissect the news of the day, such as Kate Middleton’s edited family portrait and the latest conspiracy theories around extraterrestrial life.

Reddit had invited thousands of its most loyal users to buy shares in its IPO. It was a risky move that added pressure on Reddit and its bankers for the stock to perform well.

Ahead of the IPO, some Reddit users on its WallStreetBets message board—the same group that helped catapult so-called meme stocks including GameStop in 2021—had called for traders to sell Reddit stock or short it. They cited various reasons, including that it remains unprofitable.

But much of that sentiment appeared to evaporate by late Thursday, said 28-year-old Noor Al, head moderator of WallStreetBets and a finance professional who lives in Toronto. “A lot of people are very positive and celebrating their wins,” he said.

Reddit was founded in 2005 by then-college roommates Steve Huffman and Alexis Ohanian. The company was sold to Condé Nast a year later, and the magazine publisher’s parent, Advance Publications, spun Reddit off in 2011 and remains a shareholder. Huffman, who’d left Reddit in 2009, rejoined as CEO in 2015.

The company’s big shareholders include OpenAI CEO Sam Altman, who has known Huffman since its founding, when they were both members of the inaugural class of the startup-accelerator Y Combinator. Altman served on Reddit’s board from 2014 to 2022, leaving to focus on OpenAI. Shares he controls were worth around $613 million at the closing price.

Other major shareholders include Chinese tech-conglomerate

and Fidelity Investments.

Write to Corrie Driebusch at corrie.driebusch@wsj.com and Sarah E. Needleman at Sarah.Needleman@wsj.com