There’s nothing like a moribund IPO market to create a pleasant backdrop for a bull run. We’ve had some small biotech deals and the usual SPAC junk. But nothing big, seemingly for ages. Until Reddit. Its initial public offering — which will probably come at a $7 billion valuation and an odd price tag of $31 to $34 a share — requires people to buy shares in a social media company that has never made money. It’s been around for 19 years and it still hasn’t produced anything but adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization), an alternative measure of financial performance that I will not recognize because it has lost money for too many of us. Reddit did post $804 million in revenue for 2023, a sizable 20% growth from the previous year. This will get some institutions interested in participating in the upcoming IPO and hopefully keep some of its larger investors, including the mercurial Sam Altman, CEO of OpenAI; Conde Nast parent Advance Magazine Publishers, a still thriving mostly print entity; and Tencent (go figure). Hot on the heels of the Reddit deal is the expiration of the IPO lockup period for Arm Holdings on March 12. Company insiders have been prohibited from selling shares of the British chipmaker since it went public in September, and I have no idea if there will be sellers of any size. Who knows with a company that sports a long-standing partnership with Nvidia ? But things loom when it comes to these matters. Reddit is a confusing deal. Employees will be able to sell stock on the deal, and some will sell given how long they have been around. It makes too much sense not to sell. But there could likely be buyers, perhaps the memesters, remnants of the GameStop era, and the options trading folk at Robinhood (another divine mystery). I do know this: If Reddit rallies, there will be others to follow. If it doesn’t, we could see a continuation of the lack of share supply, which is a function of endless buybacks that…
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