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Reddit's IPO Filing Puts These ETFs in Focus

Reddit, the popular social media platform, has made its initial public offering (IPO) filing public, revealing key financial insights. The company reported a narrowed net loss of $90.8 million in 2023, coupled with decent revenue growth of about 21%.

These figures set the stage for Reddit's much-anticipated debut on the U.S. stock market in March, marking a significant milestone for the platform, per Reuters, as quoted on Yahoo Finance.

User Metrics and Engagement

In the three months leading up to December 31, 2023, Reddit boasted an average of 73.1 million daily active users and 267.5 million weekly active users. The platform also noted the presence of over 100,000 active communities and a remarkable 1 billion cumulative posts. These metrics underscore Reddit's broad user base and vibrant community engagement.

Strategic Partnership With Google and Valuation

Ahead of its IPO, Reddit secured a strategic partnership with Alphabet's Google GOOGL, signaling its intent to leverage artificial intelligence capabilities. The deal, estimated at $60 million annually, highlights Reddit's commitment to enhancing its platform.

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The deal will allow Google to train AI models on its posts. Moreover, Sam Altman, renowned for his role at OpenAI, has invested over $60 million in Reddit, securing a 9.2% share of the voting power within the online discussion platform.

With a valuation of $10 billion in a 2021 funding round, Reddit's upcoming IPO leaves industry observers speculating on the valuation the company will aim for. It is anticipated to offer nearly 10% of its shares during the IPO.

A Rich History and Promising Future

Founded in 2005 by Steve Huffman and Alexis Ohanian, Reddit has garnered support from prominent investors and celebrities. While profitability remains a goal, Reddit's impending IPO signifies a new chapter in its journey.

ETFs in Focus

The market debut of Reddit could pave its entry into a number of ETFs in the coming days. Investing in IPO ETFs could be a compelling way to enter the IPO business without directly investing in individual companies. IPO ETFs are funds that invest in a basket of companies that have recently gone public, providing diversified exposure to the IPO market. Plus, the stock may be included in several sector ETFs that align with the space Reddit operates in.

Below we highlight few such ETFs that should be tracked in light of Reddit's likely IPO (read: Time for IPO ETFs?).

Renaissance IPO ETF (IPO)

The underlying Renaissance IPO Index is a portfolio of newly U.S.-listed initial public offerings of companies whose unseasoned equities are under-represented in core U.S. equity indices. IPOs that meet liquidity & operational screens are included in the Index at the end of the fifth day of trading, or upon quarterly reviews, weighted by tradable float, capped at 10% & removed after two years. The fund charges 60 bps in fees.

First Trust US Equity Opportunities ETF FPX

The underlying IPOX-100 U.S. Index is a modified value-weighted price index measuring the performance of the top 100 companies ranked quarterly by market capitalization in the IPOX Composite U.S. Index. The IPOX Composite U.S. Index is a rules-based value-weighted index measuring the average performance of U.S. IPOs during their first 1,000 trading days. The fund charges 60 bps in fees.

Communication Services Select Sector SPDR Fund XLC

The underlying Communication Services Select Sector Index seeks to provide an effective representation of the communication services sector of the S&P 500 Index. The fund charges 10 bps in fees.

Global X Social Media ETF SOCL

The underlying Solactive Social Media Index is designed to reflect the performance of companies involved in the social media industry, including companies that provide social networking, file sharing, and other web-based media applications. The fund charges 65 bps in fees.

Invesco NASDAQ Internet ETF PNQI

The underlying Nasdaq CTA Internet Index is a modified market-capitalization weighted index designed to track the performance of the largest & most liquid U.S.-listed companies engaged in internet-related businesses & that are listed on one of the three major U.S. stock exchanges. The fund charges 60 bps in fees.

Invesco AI and Next Gen Software ETF IGPT

The underlying STOXX World AC NexGen Software Development Index is comprised of companies with significant exposure to technologies or products that contribute to future software development through direct revenue. The fund charges 60 bps in fees.

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Alphabet Inc. (GOOGL) : Free Stock Analysis Report

Global X Social Media ETF (SOCL): ETF Research Reports

Renaissance IPO ETF (IPO): ETF Research Reports

Invesco NASDAQ Internet ETF (PNQI): ETF Research Reports

First Trust US Equity Opportunities ETF (FPX): ETF Research Reports

Communication Services Select Sector SPDR ETF (XLC): ETF Research Reports

Invesco AI and Next Gen Software ETF (IGPT): ETF Research Reports

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