Reddit was one of the main facilitators in the meme stock craze that followed the massive liquidity injeciton from the Federal Reserve after the pandemic market crash. So much money was flowing into equity markets that just about every stock on the NASDAQ was ripping. Even the tiny companies that had no businees participating in the buy everything rally were ripping as well.
Along with influencers on other media outlets, like YouTube's Roaring Kitty, Reddit's WallStreetBets played a major role in the culmination of the Meme Stock Era.
Unprofitable companies like$AMC Entertainment (AMC.US)$and$GameStop (GME.US)$kicked off the meme stock era with insane jumps up in price of several hundred percent. This was all caused by the massive influx of newly printed cash and the tremendous exposure meme stocks were receiving thanks to social media outlets like Reddit.
Reddit IPO
Once I heard news of Reddit going public through an IPO, I assumed it would have a meme stock kind of rally. Especially since the company was one of the main reasons that meme stocks were able to rally as much as they did. But then I remembered that, generally speaking, IPOs do not perform so well until a year or so after going public. I believe it takes an average of 18 months after IPO before the ticker starts performing better in the stock market.
We have seen this happen several times, where a company will go public and eventually make lower lows than the initial offering price. Of course, some IPOs blast off out of the gate and never look back. But most of the time, we will see lower lows being printed on the charts before a newly public company gains any lagitimate upward traction.
Coinbase'sIPO Performance
Here is an example of a very popular company whose IPO was highly covered on just about all news media outlets.$Coinbase (COIN.US)$had a lot of hype leading up into the IPO. I should say that the IPO was a success as the price jumped over 70% of the initial offering price on day one.
That rally lasted only one day, which is understandable since anybody that invested pre-IPO was likely going to take at least a little profit after making so much in just a couple of hours. In fact, the selling continued until Coinbase lost over 90% of its total value.
In this case, Coinbase dropped for about 20 months before printing all-time lows. That is just a couple of months more than the average. It has been rallying ever since thanks to the very bullish crypto markets.
AirBnB's IPO Performance
Here is another example with$Airbnb (ABNB.US)$. This IPO was more successful as the price jumped over 143% on day one. It continued to rally another 33% the following weeks. But yet again, like many other IPOs, lower lows were printed, and the share price took a massive dive.
In this case, it took AirBnB 25 months and an almost 63% drop before 52-week lows were printed and the current rally ensued. Both Conbase and AirBnB have just recently reached the price levels investors paid if they entered on day one following the IPO. This historical poor performance of companies that go public is one of the reasons that I choose to stay away from most IPOs.
Reddit's Performance So Far
So far, Reddit has been performing well. The price is still well above the initial offering price, and the day one rally reached about 100%. Since then, the price has come down from its all-time highs but still seems to be holding up.
You can see in the chart below that, since all-time highs were printed, the price has dropped near the lowest level it has been since going public. There is not a lot of data on this chart, but we can only go off of what we have, so we can call this previous low the only support level that we have so far. This price level is right around the price of Reddit on day one of the IPO.
Personally, I dont have high hopes for this IPO at the moment. I am on the side of the fence that thinks this company will perform like most others do following their IPOs. I may be wrong. If we can see the price action rebound off of this support level that I have mentioned, then I might be more hopeful. If we make new lows, then that will lead me to believe that the price will be dropping below $34.00 in the near future. I will be posting updates on Reddits throughout the week.
So, what do you think? Will Reddit have more success than the typical IPO? Or do you think we will make further lows and take several months before starting to perform well?
Rockaphobic : 40P 19 APR ... DOWN SHE GOES
V_银杏 : see u at 20
SpyderCall OP V_银杏 : Agreed
SpyderCall OP Rockaphobic : I believe it will drop lower as well.