Social media platform, Reddit’s shares are up 48%, after it recently made its IPO debut. The company has not turned an annual profit since launching in 2005.

The company persuaded investors, positioning its content as training ground for AI programs. It was reported last month that Reddit signed a data licensing agreement with Google, worth around U$60 million a year.

Reddit still relies on advertising for most of its revenue, however, it used AI in its IPO (initial public offering) marketing as a growth area.

It was revealed last week that the FTC (Federal Trade Commission) is investigating its AI data licensing deals.

The Chief Operations Officer at Reddit, Jen Wong said, “At the core we are a growth company. Achieving our mission means that we want to grow users and community.”

Shares opened at U$47 on Thursday, after being priced at U$34 in the IPO. The company ended trading at U$50.44.

Reddit was valued at U$6.4 billion in the IPO, with the company and shareholders raising U$748 million.

In a private fundraising round back in 2021, the company was valued at $10 billion, and a strong stock market reception revealed it may not have needed to curb valuation expectations.

The entry to become a publicly traded company has been in planning for over two years. The company filed for an IPO back in December 2021, however, the stock rout led to a delay. This debut will be a test for the market.

The CEO of Accelerate Financial Technologies, an alternative investment solutions firm, Julian Klymochko said, “If Reddit trades poorly, it will cast a shadow over the IPO market. Many companies will hit pause on their IPO initiatives.”

The popularity of Reddit rose during the “meme-stock” 2021 saga, where a group of retail investors partnered on its forum “wallstreetbets” to purchase shares of companies like GameStop.

As part of a plan to reward the user base, Reddit reserved 8% of shares on offer for eligible users / moderators / board members / and friends and family of employees and directors.

It also offered shares to retail investors via online brokerage platforms. However, this move comes with its fair share of risks, according to analysts.

Retail traders are usually kept out of bidding in an IPO, meaning they are eager for exposure to a newly listed company, to buy shares when they start trading. Allowing early access could reduce demand.

These buyers are not under a lock-up period, and can choose to sell when the stock starts trading, which could increase price volatility.

Founding Partner at Investment Firm Launchbay Capital, Alan Vaksman said, “I don’t know one company which really benefits from allocating shares to their users.”

Stocktwits.com, a social media firm that analyses posts and message volumes related to a company’s ticker symbol, indicated retail sentiment for Reddit was “extremely bullish.”

However, users on Reddit’s “wallstreetbets” forum said they would short stock after trading starts.

Hysteria for technology stocks could assist Reddit with gaining a good start, according to assistant professor of finance at Vanderbilt University, Josh White.

“We don’t get many large tech IPOs. Those tend to be very popular because it’s hard to buy that kind of growth.”

Analysts claimed investors will be examining the company’s head to profitability.

Director of the Georgetown University Psaros Center for Financial Markets and Policy, Reena Aggarwal said, “The real news is going to be after the first earnings call — where are they headed, what are the results looking like, what changes are they going to make.”