Reditt: Should you buy it?

Kenneth Coniglio |

The following is an article written by Keith Fitz-Gerald which appeared in his March 22, 2024 Daily Market Notes.  In it, Keith discusses the recent highly anticipated initial public offering (IPO) of Reddit common stock.  Importantly, Keith addresses a question we sometimes hear from our clients regarding their desire to participate in any given IPO - “Should I try to purchase these shares in the initial offering?”  Please note:  PWA Financial  has no investment opinion for or against Reddit.  This is not a recommendation to buy, hold or sell Reddit stock.  However, we agree with Keith’s opinion on the nature of any initial public offering, and how an investor should proceed.

Reddit: should you buy it?

Reddit shares popped nearly 50% yesterday when it IPO’d on the NYSE at the very top of its range. 

Should you buy it? 

That depends on how you see the company. 

Reddit is often described as social media for people who hate social media.  

What makes it different is that the content is socially curated and promoted by voting, the goal of which is to send highly-thought-of stuff to the front page. 

My $0.02 is simple. 

IPOs are a huge con game.  

To be fair, they weren't always that way. Proven companies often “went public” because they needed money to grow operations, build new products, services and more. You could make a buck if you bought in. 

These days IPOs are an insider’s exit. More often than not, companies going public “might” make a profit somewhere down the line but are still losing money hand over fist. What's more, the offering is rigged so that insiders, early investors, lawyers and bankers collect huge riches when the public gets duped, err, invests. 

I suggest you give any company that goes public these days a few quarters to prove itself. Then if it does and after the hype dies down, decide. 

Including Reddit. 

Keith’s Investing Tip: There is NEVER a rush to buy anything in today's markets. If you’re a trader and after the fast money, you’ve got to act more quickly but that’s different. If you’re an investor, you can act calmly and deliberately.