Three Things (3/25)

Reddit IPO

Reddit (RDDT) had its initial public offering on Thursday and shares surged more than 48%. The euphoria was short lived as shares fell significantly on Friday although the stock did not fully erase its gains. As the most highly anticipated IPO of 2024, Reddit created a lot of buzz being the first major social media company to go public since Pinterest in 2019. After an IPO dry spell over the last couple of years, many say Reddit’s initial $6.4 billion valuation is closely tied to its monetization plans for AI.

Although stocks tend to be highly volatile during their first few days trading on the public market, some have deeper-rooted doubts about Reddit’s ability to reach profitability after their multi-million dollar net loss in 2023. Despite what lies ahead, the company’s long awaited debut created hope for more companies looking to test the public waters. The recent success could pave the way for other venture-backed startups to take advantage of the recent growth appetite from investors. 

Chipotle 50-for-1 stock split

This past week, Chipotle’s (CMG) board approved a 50-for-1 stock split, which will lower the stock price and make it more accessible to investors. Stock splits can sometimes prompt additional retail buying because investors see the stock as cheaper or more easily obtainable. If approved by shareholders in June, this would be the first stock split in Chipotle’s 30 year history and certainly one of the biggest splits in the New York Stock Exchange’s history. 

Many are wondering why Chipotle would propose such a huge split, rather than a 2-for-1 or 3-for-1 split. The burrito giant’s CFO mentioned wanting to make the stock more attainable, specifically for employees. The stock is currently trading at over $2,800 a share following a massive run higher over the last year. The real benefits of a stock split help make shares more affordable to smaller investors while creating more liquidity in the market – two outcomes that could welcome more buyers to the table.

Apple faces DOJ antitrust case

The U.S. Department of Justice filed a lawsuit against Apple, accusing them of behaving like a monopoly and using the iPhone to limit software and hardware competitors in the space. A few examples that the DOJ cited are limiting super apps to increase iPhone reliability, controlling users’ payments through the ubiquity of Apple Pay, and limiting smartwatch cross-platform compatibility. In addition, while memes poke fun at “green texts” ostracizing Android users, the DOJ specifically accused Apple of not developing iMessage for Android devices so that customers will view rival smartphones as inferior.

Apple quickly provided an extensive list of rebuttals to the DOJ’s accusations. Like Google’s 2020 case and Microsoft’s case in the 1990s, it could take years before the courts come to a resolution. By the time they actually land on a decision, billions of dollars will still be earned and who knows if a new administration would even be interested in hearing a case. It’s a story to watch but it’s nothing new: as companies grow and gain market share, they often face more distractions. This shouldn’t bar them from long-term success. 

Disclosures:

As of writing, GOOGL, AAPL, and MSFT are holdings in Titan’s Flagship strategy.

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