Reddit investor Tom Sosnoff says IPO could benefit from being the only 'pure social media' stock

Published Wed, Mar 20 20249:50 AM EDTUpdated Wed, Mar 20 20244:34 PM EDT

Jesse Pound @/in/jesse-pound @jesserpound

Reddit may have a lane on Wall Street all to itself when it goes public later this week, according to Tom Sosnoff, CEO at brokerage firm TastyLive. Sosnoff told CNBC's " Squawk Box " on Wednesday that Reddit will fill a niche in the market for investors who want to bet on the growth of social media. "I think Reddit's going to be a really interesting play because it's going to be, for most investors, the only tradable pure social media app," Sosnoff said. Reddit's IPO is expected to price on Wednesday, with the stock set to trade on Thursday. The company said it expects the stock to be valued at between $31 and $34 per trade, which will result in a capital raise of about $750 million . Investing in social media has changed dramatically over the last decade. Twitter is now a private company owned by Elon Musk. Facebook changed its name to Meta Platforms and has been spending billions of dollars to diversify away from social media. Snap pitches itself as a camera technology company instead of a social media firm. And the emergent TikTok is owned by the private Chinese entertainment conglomerate ByteDance. Reddit being a pure play social media stock could have a downside too, as the company has never turned a profit. Sosnoff said he believes the company will become more disciplined and focus on profits once its is public. "I think it's because they've never really had to. I know that sounds kind of crazy, but one of the nice things about Reddit going public is that it's going to force them to learn to be profitable. And remember, that's happened to a lot of companies," Sosnoff said. Sosnoff is already an investor in Reddit. He told CNBC that he bought equity in the company through a private sale last year at a $5 billion valuation. Because he is a pre-existing shareholder, he is subject to lockup period after the company goes public, Sosnoff said. Outside of the institutional investors are large funds that typically participate in IPOs, Reddit has also opened the process to some of its users. That group is not subject to a lock-up period, which Reddit warned could increase the volatility of the stock.