Will Reddit Perform Like Most Other IPOs?

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.

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.

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.

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.

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.