Reddit Inc. shares had a remarkable performance on Monday, closing their third day of trading with a 30% increase.
This surge in stock value has attracted the attention of retail investors, who are showing a more positive outlook towards the company following its recent initial public offering. Stocktwits, a social-media platform focused on the stock market, has observed this heightened interest and improved sentiment among investors.
According to Tom Bruni, the head of market research at Stocktwits, sentiment towards Reddit was quite negative before its IPO. The dynamic persisted on the second day of trading, with the stock ending down 8.8% on Friday.
According to Bruni, there is a prevailing bullish thesis on Stocktwits that suggests the rise of AI/LLMs has increased the value of Reddit data and provided the company with a lucrative revenue stream, as evidenced by their $60 million deal with Google.
Reddit has emphasized the significance of artificial intelligence in shaping its future, highlighting how its content can contribute to the development of AI and large-language models.
“This afternoon, we observed a shift in sentiment towards a more positive outlook for the first time. However, the volume of messages remains within the usual range,” Bruni commented. There is significant interest in the stock, as evidenced by the large number of people following it on our platform. With a significant number of observers, should this stock gain momentum and rise, there will be numerous individuals eager to join the bandwagon, regardless of their sentiments towards the underlying business.
Before the offering, there were worries that Reddit’s stock could face fluctuations following its entry into the public market. “The post-IPO volatility can be attributed to the price-discovery process, but retail sentiment towards the stock’s outlook is still divided,” commented Bruni.
During the lead-up to its IPO, there were also worries that Reddit might face conflicts with its dedicated user base as it aims to become profitable, a sentiment shared by Bruni. He emphasized the central conflict regarding how Reddit will navigate the needs and desires of its users while also considering the demands of advertisers and the company’s wider business relationships.
“Many times, the factors that can generate revenue for the business are in conflict with how users interact with the platform,” he explained to MarketWatch. “Last year, there was a noticeable exchange of opinions between users and management, as numerous subreddits decided to go dark in protest of Reddit’s decision to charge third-party apps for API access.”
“In the end, the business prevailed and users discovered that their ability to influence the company’s decision was not as significant as they had believed,” Bruni remarked. Furthermore, there were users who declined the opportunity to acquire IPO stock, which indicates a certain level of skepticism towards the platform/business among certain retail investors.
Reddit has extended an invitation to the users and moderators who have made valuable contributions to its social-media platform, offering them the opportunity to purchase shares in its IPO. The company has yet to respond to a request for comment on this story.
Another interesting stock to watch in the market is GameStop Corp., a video game retailer and original meme stock. It’s worth paying attention to their fourth-quarter results this week, as suggested by Bruni. “Given the current state of Reddit and the market reaching new heights, numerous traders are once again considering the inclusion of traditional ‘meme stocks’ in their watchlist,” he stated.
Shares of GameStop saw a 15.4% increase by the end of Monday’s session. The company will be releasing its fourth-quarter results after the market closes on Tuesday.
