Reddit: No profit, but big bets
The good news for devotees of free money is that rumours of the extinction of the IPO market appear to have been exaggerated — Reddit bounced up by a healthy 48% on its first day of trading, a couple of days after Astera Labs had surged by 72% on its Nasdaq debut. Reddit has never made an annual profit in its 19 years of existence, but this minor detail didn’t stop the punters from placing orders for more than 10 times the shares on offer.
About 2-million shares were allocated as a friendly bung to the site’s users and moderators, which should hopefully generate some goodwill and head off any chance of a short-selling pile-on. The success of the listing caused its market capitalisation to hit $9.5bn, a whisker shy of the $10bn valuation at which it last raised money back in 2021. With about 73-million daily users, the company is tiny compared with Meta’s 2.1-billion, but it’s a devoted if unruly user base that’s never happier than when its WallStreetBets trading forum is sticking it to the man.
Reddit’s CEO cashed out a handy $17m on the listing, to boost the distinctly generous $193m of total compensation he received in 2023, as he prepared the company for the market by tidying up some of its more extreme communities to make it more attractive to advertisers. The challenge will be to preserve the community-focused appeal of the brand while satisfying investors’ desire for profitability, and remembering that it has an in-house army of trolls who will be quick to bite back if provoked.
Kering: Gucci takes hammering
The danger with analysing the luxury goods sector lies in underestimating the discernment of the consumer. It’s easy to be lulled into thinking that you can push out any old frock or handbag and as long as it comes with a well-known name and a suitably ridiculous price tag it’ll fly off the shelves.
However, as Kering’s dire sales warning has shown, this is most definitely not the case. And it can prove extremely difficult to regain momentum when a brand starts to lose it — especially in a market that’s already looking wobbly at the edges.
Gucci is the big problem with François-Henri Pinault’s group. The brand’s first-quarter sales were down almost 20%, and it was particularly weak in the crucial Asia-Pacific region. This comes after rivals such as Prada announced a strong first quarter, and Kering’s own smaller brands such as Bottega Veneta and Saint Laurent are trading well, so it seems that the problem is not with the sector as a whole but more specific to Gucci itself.
The Gucci brand has a back story of epic family feuding, culminating in the murder of Maurizio Gucci in the lobby of its Milan office in 1995, with his ex-wife getting a 16-year stretch for hiring the hitman.
Gucci started struggling under creative director Alessandro Michele, who was replaced by Sabato de Sarno last year. De Sarno’s first collection started arriving in stores only in February, and it is rumoured to have a more pared-back luxury aesthetic than his predecessor’s bling, so let’s hope it brings the consumers rushing back.
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