Reddit IPO makes OpenAI CEO Sam Altman $400 million richer

In a thrilling market debut on Thursday, Reddit burst onto the New York Stock Exchange scene, sending its shares skyrocketing by an astonishing 70%. The impressive surge marked a formidable entry into the public market for the social media giant, leaving investors buzzing with excitement.

By the time the closing bell rang, Reddit’s shares had notched up a remarkable 48%, underscoring a potential resurgence in investor appetite for IPOs from promising yet unprofitable companies. But the bullish momentum didn’t fizzle out there. As the new week kicked off, Reddit shares surged another 30%, with investors eagerly snatching up the stock in the wake of its blockbuster IPO.

Launching at $34 on Thursday, Reddit’s shares closed at a staggering $59.80, propelling the company and its existing investors to rake in roughly $750 million combined through the offering. This surge represents a significant milestone for Reddit, marking it as the first major social media company to go public since Pinterest’s IPO back in 2019.

What many may not realize is that among Reddit’s early backers is none other than OpenAI CEO Sam Altman. According to the public offering filing with the SEC and Reddit’s prospectus, Altman, a former Reddit board member, holds the distinction of being the third-largest shareholder in the company. His ownership of 4.5% of its Class A shares and 9.3% of Class B shares translates to a commanding 9.2% voting power ahead of the IPO. CNBC also reported yesterday that Altman’s stake in Reddit surged from $200 million to over $613 million post-debut.

“OpenAI CEO Sam Altman, an early Reddit investor and former board member, saw his stake in the company grow from $200 million to over $613 million after the debut,” CNBC reported.

Altman’s ties with Reddit run deep. He first invested in the company during his tenure as president of tech startup accelerator Y Combinator and even briefly assumed the role of Reddit’s CEO in 2014. Altman took the reins of OpenAI in 2020, and the Microsoft-backed AI research lab gained global acclaim following the launch of ChatGPT in November 2022.

While a hefty 22 million shares were offloaded by shareholders at $34 each, setting Reddit’s fully diluted valuation at a formidable $6.4 billion, this figure represents a significant drop from its lofty $10 billion valuation attained during a 2021 funding round.

Despite Reddit’s heavy reliance on advertising for revenue, the company has been touting artificial intelligence (AI) as a pivotal growth avenue during its IPO marketing roadshow. However, a recent disclosure from Reddit revealed that the U.S. Federal Trade Commission (FTC) is probing its AI data licensing agreements.

Reddit was founded 19 years ago by Alexis Ohanian. The social media platform has since evolved into a social news aggregation powerhouse, drawing billions in monthly traffic. As it braces for its IPO, Reddit’s journey serves as a testament to the resilience and dynamism of tech startups in the ever-evolving landscape of digital innovation.