REDDIT IPO

Corporate Reddit Is Here, But Can It Convince Investors That It’s More Relevant Than Ever?

Avid social media users can agree on one thing: Reddit is in a league of its own. While other platforms come and go, Reddit remains a staple on our screens despite angering its community time and again. CGP Grey once said, “Reddit makes you feel more like a citizen of the internet than a citizen of your own country.” But what happens when Reddit goes corporate?

Reddit or not, here it comes: Yesterday, Reddit filed for its long-awaited IPO, kicking off the process of bringing the social media giant to the New York Stock Exchange (NYSE) under the ticker $RDDT. Last year, the company’s sales jumped 21% to $804M, active users grew by 27%, and net losses fell 43% to $91M.

• With over 73M daily active users and 100K active communities, Reddit is expected to go public in early March, which could fetch a valuation surpassing $5B.

• That’s significantly lower than its $10B valuation in 2021 — and a far cry from Meta (NASDAQ:META), whose market cap would be 248x larger than Reddit’s.

Reddit rolled into 2024 with $1.2B+ in cash, more than a fifth of its proposed valuation — thanks in part to last summer’s decision to lay off 5% of its workforce, which helped narrow its losses. Despite its widespread popularity, Reddit has struggled to build a concrete business model but found new life during the pandemic as online communities blossomed (shout-out to r/wallstreetbets).

Reddit Gone Corporate

While Reddit stands apart from its competitors in many ways, its revenue streams aren’t so different. Despite positioning itself as a community-driven alternative to social giants, it has remained an afterthought for advertisers — below Meta, TikTok, and even Twitter/X. To catch up, the company is exploring options to boost its revenue:

• This week, Reddit started selling user data to help Google (NASDAQ:GOOG) train its AI, a decision that Founder and CEO Steve Huffman defended as “best for Reddit’s survival.”

• Last year, it also raised prices on its API, which developers use to access the platform for building related tools — leading to a temporary blackout of over 7K subreddits.

Throw a bone: In a concession to its users, the company offered 75K of its most engaged users access to shares at its IPO price. But sometimes, being an early bird doesn’t pay off. Users of another retail crowd favorite, Robinhood (NASDAQ:HOOD), were given similar access during its 2021 IPO. Since then, $HOOD has plummeted nearly 60%. And while the market landscape is different today, buying into companies right when they go public often spells trouble for investors.

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LARGECAP RECAP

💾 Can Microsoft help Intel anchor the return of advanced chips to the US?

A decade ago, Intel (NASDAQ:INTC) was the world’s most advanced chipmaker — but today, it’s playing catch up with Asian competition like TSMC and Samsung. To regain its edge, Intel has poured billions into building state-of-the-art semiconductor plants in the US. Now, it’s finally scoring billion-dollar clients.

• Microsoft (NASDAQ:MSFT) announced it would use Intel’s semiconductor plants to manufacture its own AI chip as part of a multi-billion dollar deal.

• The chip will use Intel’s cutting-edge 1.8nm fabrication technology, making it one of the densest high-performance chip architectures ever made.

Intel’s in the arena: Intel has been on a turnaround tour after years of sluggish sales and demand in its computing sector — but its new foundry business could turn all that around. Investors have sent the stock up more than 77% from its Oct. 2022 lows, hoping the third-largest chip producer could soon reclaim the top spot.

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Markets & Economy

Japan’s Nikkei stock market average hits 34-year record high: Put simply, the index’s 225 companies have been raking in cash, posting $266B in profit in their current fiscal year — though inflation is likely playing a role in those hot earnings. [Read]

Latest Fed minutes show resistance to premature rate cuts: Looks like we’re staying higher for even longer, as the Fed tries to avoid >2% inflation becoming “entrenched.” While a US rate cut is expected in June, traders in Europe see no cuts in sight. [Read]

US prison population rises for first time in nearly a decade: Combined state and federal prison numbers climbed 2.1% between 2021 and 2022. Though it’s the first uptick in a while, the population remains 360K lower than in 2012. [Read]

Business & Wealth

AT&T (NYSE:T) customers face massive outages: You might have had trouble reaching some friends yesterday morning, especially if they live in Houston, Chicago, Dallas, or LA. Outages peaked at around 71K customers by 8 a.m. — the cause remains unknown. [Read]

Google (NASDAQ:GOOG) to produce Pixel phones in India by next quarter: The tech giant is diversifying production beyond China as US-China tensions continue. They join Apple (NASDAQ:AAPL) and Samsung, who recently moved smartphone production to India for similar reasons. [Read]

Corporate jet users may get a call from the IRS: Some private jet owners face scrutiny for writing off personal travel as business expenses. The IRS has already collected $482M from crackdowns — part of efforts to recover $700B in annual uncollected tax revenue, according to the Biden admin. [Read]

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DIGIT OF THE DAY

The Latest “No Recession” Signal: Cardboard Box Sales Rebound After Falling 10% in 2023

Always think outside the box, but don’t forget to look inside it for signs of the economy's direction. The “cardboard box indicator” is an unconventional measure that indicates how the economy is doing based on the volume of shipped goods, which has helped predict potential recessions in the past. After all, more boxes shipped = more sales = more robust economy.

• Charles Schwab’s Jeffrey Kleintop notes that “during the last three or four recessions over the last 30 years, demand for cardboard boxes fell by 10% to 15%”(MW).

• However, he believes there is a turnaround now as corrugated fiberboard demand rebounds after falling over 10% last year.

Cardboard-nomics: Recent earnings reports offer insight into economic strength. This week, Walmart’s (NYSE:WMT) CFO mentioned feeling “better about the health of the economy” — though concerns about consumer spending in certain categories linger. Placer.ai’s R.J. Hottovy expects spending spikes around events like Valentine’s Day and Mother’s Day — saying, “We underestimated that people still were willing to spend around these events.”