SUPERNEWS

Equities

Reddit's IPO Signals Potential Market Revival Amidst AI Prospects

Cathie Wood holds off on Reddit, citing high prices despite its long-term AI potential and market volatility post-IPO.

By Alex P. Chase

ᐧ

4/3, 09:55 EDT
Pinterest, Inc.
article-main-img

Key Takeaway

  • Cathie Wood, CEO of Ark Invest, holds off on buying Reddit shares at current prices despite seeing long-term AI potential.
  • Reddit's IPO, first major social media company to go public since Pinterest in 2019, signals a possible IPO market revival.
  • Despite initial purchase, Wood awaits a better entry point for Reddit, emphasizing its value in AI data exploitation alongside 'X'.

Reddit's IPO Performance

Ark Invest CEO Cathie Wood, during a CNBC "Squawk Box" interview with Andrew Ross Sorkin, shared insights on Reddit's recent initial public offering (IPO) and its performance in the stock market. Despite a long-term belief in Reddit's artificial intelligence prospects, Wood is currently holding off on buying more shares of Reddit at its current prices. She emphasized, "We don’t think it’s a meme stock. It’s actually quite an interesting stock." Wood highlighted Reddit and 'X' (formerly Twitter) as possessing some of the most valuable data for AI exploitation. Reddit shares have seen significant volatility since going public, with price movements including a rally of as much as 30% and a drop of nearly 15% in different trading sessions.

Market Context and IPO Revival

Reddit's IPO marks a notable event in the social media sector, being the first major social media company to go public since Pinterest in 2019. The IPO occurred amidst a slow revival of the IPO market, which had experienced a two-year dry spell. Other notable companies such as Instacart, Klaviyo, and Arm Holdings also entered the market around the same time, signaling a potential resurgence in IPO activities. Reddit's initial offering price was set at $34, and since then, the shares have closed at $50.45, which is almost 50% above the initial offering and 7% above its opening price on the New York Stock Exchange.

Investment Strategy and AI Prospects

Cathie Wood's investment strategy reflects a cautious approach to Reddit's current valuation, despite Ark Invest's initial purchase of Reddit shares during the offering. Wood's comments suggest a strategic wait for a more favorable entry point, aligning with her view of Reddit's long-term potential in leveraging artificial intelligence. This perspective underscores the importance of AI technology in evaluating the intrinsic value of companies like Reddit and 'X', which are seen as having valuable data that can be harnessed for AI applications.

Street Views

  • Cathie Wood, Ark Invest (Neutral on Reddit):

    "We don’t think it’s a meme stock. It’s actually quite an interesting stock. We’re looking at it and ‘X’ as having some of the most valuable data out there to exploit from an AI point of view."