You know the story by now: A band of retail traders helped send shockwaves through the stock market in recent weeks by taking bets traditional investors would consider absurd. Shares of video game retailer Gamestop at one point hit $347 apiece after languishing in the upper teens just weeks earlier.
Now, the social media platform that housed the community that started it all has doubled its valuation.
On Monday, Reddit announced it raised $250 million in funding, valuing the company at $6 billion. Last valued at $3 billion in 2019, the latest round of funding is led by Vy Capital.
The new round of funding comes as Reddit sits at the center of a few big themes here:
A. Communication has moved online as a result of the pandemic.
B. Private market investors in recent months have warmed to social media investments (ahem, Clubhouse).
C. Stay-at-home orders and the recent Gamestop saga have fueled a spike in stock trading, and therefore, attracted millions more users to Reddit’s infamously irreverent r/WallStreetBets community.
Many source the beginnings of the Gamestop rally to posts from r/WallStreetBets users that have inflicted painful losses to hedge funds shorting the games company. While shares of Gamestop are now coming down to earth at about $50 apiece, the former rally’s impact has been far from negligible. No, the story may not be the cut and dry David vs. Goliath, retail trader vs. Wall Street narrative that was woven early on, since many bigger investors also have gained from the stock market action. But the bottom line remains: Smaller traders have shown the ability to move the market.
As for Reddit, the incident translated into “millions of new users as well as new advertisers,” according to the Wall Street Journal citing CEO Steve Huffman. So significant was the incident that Reddit even alluded to the Gamestop saga in its five-second, all-text Super Bowl ad. “Big game spots are expensive, so we couldn’t buy a full one,” the ad showed. “One thing we learned from our communities last week is that underdogs can accomplish just about anything when they come around a common idea.”
Also according to the Journal, Huffman says Reddit plans to use the new funding to invest in areas including “video, advertising and consumer products, as well as to expand into international markets.” Last year, the company acquired a video and meme sharing app, Dubsmash.
ROBOTS IN THE KITCHEN: Food delivery company DoorDash (NYSE: DASH) will acquire Chowbotics, a maker of a salad-assembling robot, for an undisclosed sum. Previously backed by investors including TechStars, Chowbotics’ acquisition is certainly a sign that DoorDash believes that its future isn’t just about the delivery side of things, but also some degree of automation within the preparation too.