Reddit’s IPO makes founders and Redditors into winners
Post this one under r/getrichquick: On Thursday, Reddit, the ubiquitous and somewhat nerdy chatboard that calls itself “the front page of the Internet,” went public, with shares zooming up 48 percent by the end of the day. That was a relief to many investors, who’ve waited nearly two years for the IPO, which values the company at $9.5 billion. This was just shy of the $10 billion valuation it had after a 2021 fundraising round.
Reddit, whose popular discussion channels are moderated by volunteers, offered its most loyal users a chance to get in early, reserving 8 percent of the stock for top Redditors and other insiders. The winners included co-founder Steve Huffman, who reportedly cashed out 500,000 shares for about $17 million.
Other investors getting rich included AI guru Sam Altman, whose stake rose by $200 million in the IPO. But the biggest winner was the Newhouse family, whose Advance Magazine Publishers Inc. will continue to own about a quarter of Reddit. Their initial $10 million investment almost 20 years ago is now worth more than $2.1 billion.
But Reddit still has some major challenges: It’s never, ever been profitable, it’s facing not only a patent infringement lawsuit from cell-phone pioneer Nokia but also a federal investigation into its plan to sell two decades' worth of moderated chats to train AI.
“Large language models need data,” Reddit COO Jessica Wong told Bloomberg TV, and Reddit has that in abundance: 19 years' worth of human experience organized by topic, with moderation and relevance. “That is incredibly important to building both a chat capability and the freshness of information. That is an area where we see opportunity.”
Apple and Google teaming up to bring the A to iPhones
It was bound to happen: the iPhone ran out of features. There’s only so much memory, so many camera lenses and so many video game chips you can pack into a gadget the size of a cassette tape. (Remember those?) So now Apple has decided to team up with Google (whose Pixel smartphones are just as good and about $200 cheaper) to introduce the search engine firm’s Genesis generative artificial intelligence to the iPhone.
Apple has mostly sat out on the AI revolution, and after a decade as the world’s most valuable company, it was surpassed by Microsoft last year. Apple’s 2 billion user base and its history of protecting user privacy make it a smart partner for Google, opening whole new markets for both firms. But it’s not all good news for Apple. This week the Justice Department announced an antitrust suit against Apple, accusing it of using its near-monopoly position in the smartphone market to unfairly pump up the price of iPhones, and keep competition out of the App Store. The DOJ says its case is about “freeing the smartphone market from Apple’s anticompetitive and exclusionary conduct,” but with its new partner, Apple may be able to generate a response to the lawsuit directly to attorney general Merrick Garland’s AirPods.
Pennies from heaven: Truth Social IPO could bring Trump a windfall next week
Donald Trump is in the hole. A $454 million hole, to be precise. If he can’t post that bond or pay that fine to New York state, attorney general Letitia James will start seizing his property. Mar-a-Lago might be safe, but his Wall Street office tower and his interest in the Fifth Avenue Trump Tower condo buildings are likely targets, as well as his golf course and Seven Springs estate in Westchester County.
So far, Trump’s attorneys have told a New York court that it has failed in more than 30 efforts to secure a bond so Trump can appeal the fine imposed by Judge Arthur Engoron. But now Trump may have found a lifeline: The parent of his Truth Social social media platform may go public on Monday in a merger with a shell company (Trump Media & Technology Group, using the ticker symbol DJT). This merger could value Trump’s stake at $3 billion, giving him cash or an asset to use for a bond. The problem?Those shares have been pumped up in a GameStop-style scheme by MAGA-supporting small investors. The little-used social media company has lost tens of millions of dollars, and generated only $3.3 million in ad revenue in the first 9 months of last year. Its price may crash when it hits the market.
Can Biden jumpstart the EV market?
It’s long been a dream of Tesla enthusiasts, environmentalists and anyone interested in saving the planet: Phase out the gas-guzzling, greenhouse-gas-producing cars and trucks that together account for a third of climate-changing U.S. emissions.
Now, President Joe Biden has unveiled new rules that will put a big dent in vehicle emissions just eight years from now. Last year, EVs made up just 7.6 percent of the market, but by 2032, the regulations will push electric vehicles to make up between 35 percent to 56 percent of new car sales, and plug-in hybrids to reach between 13 percent to 36 percent.
The rules let car makers mix and match their fleets' makeup, and could include making conventional engines more efficient. Still, they aim to slash passenger car pollution in half in less time than it takes most Americans to drive 80,000 miles. Biden says the plan will be good for America. “U.S. workers will lead the world on autos making clean cars and trucks, each stamped ‘Made in America,’” Biden said. “You have my word.”
But the plan has become a political football, with Donald Trump telling supporters the government would have to pry their gas-guzzling pickups from their cold dead hands, and promised an ill-defined “bloodbath” if China captures the U.S. market for EVs. That hasn’t yet helped Tesla, whose share price is down 32 percent this year, as it cuts margins to boost sales, which are also off, driven mainly by slowing demand in [checks notes] China.
Newton can explain it: Fed promises rate cuts are on the horizon
Investors love Sir Isaac Newton’s third law of physics: For every action there is an equal and opposite reaction. Well, maybe not always equal, but definitely opposite. So When Fed chair Jerome Powell said Wednesday that three rate cuts were in sight over the next year, the market reacted to the action. The S&P 500 reached a new record, closing 0.9 percent higher, at 5,224.62. The Dow rose 401 points, or 1 percent, to a record 39,511.34, and the tech-heavy Nasdaq hit 16,369.41, also a new high.
But but but, you ask. What about inflation? Well, it was dropping last year, but then fuel and housing costs bumped up in January and February, prompting investor concern and some cautionary words from Powell and other Fed colleagues. However, the economy is recovering from pandemic-fueled price hikes, with productivity and wages up.
“Inflation [is] coming down gradually toward 2 percent on a sometimes bumpy path," Powell said Wednesday, adding, “We've got nine months of 2.5 percent inflation now. We've had two months of bumpy inflation; it's going to be a bumpy ride." So will the ride get smoother or will the bumps throw the economy’s train off its tracks? "We will have to find out," Powell said, returning to the inscrutable language that is a hallmark of Fed chairs.
And just to be sure investors didn’t get too clear a message, he added, “[the] economy is strong, inflation has come way down, and that gives us the ability to evaluate this question carefully.”
Peter S. Green is a veteran reporter and editor who has spent more than two decades covering business and finance from Eastern Europe to New York City, and has worked for Bloomberg News, The New York Post, The New York Times and The Messenger. He lives in New York City and is always looking for the next big story.
