Reddit, Trump Media, and the Return of Meme Stocks | Pivot

1. KSKara Swisher0:00

   We called it. S- or, "Reddit's IPO is a victory. Shares of the company are up 15% at the time of taping after jumping 48% on the first trading day. The market, uh, Reddit's market cap is currently over $9 billion." Uh, another thing we called, "Trump Media is a meme stock. Shares in the company jumped over 50% in the first minutes of trading, causing a brief volatility pause. Trump Media is trading at a market cap of almost $8 billion." Uh, the company made just $3.4 million in the first nine months of 2023, which is... And they lost a ton of money. They're losing, um, they're down 39% in users. It's just a, it's a scam of some sort. It's just a, it's a Ponzi sch- I don't know, what's the word you would use? Um, so talk about Reddit first, and then, uh, Trump Media stock.

2. SGScott Galloway0:43

   Uh, we called this. They're... Reddit, uh, most trafficked site in America that's not owned by Alphabet. Incr- terrible monetization of that traffic, but at the same time that represents the opportunity. And, uh, there's also a ton of money on the sidelines. It just, all the moons lined up. I, uh, you just, you could just feel this thing was gonna get a big pop. And also, there's this very strange dynamic in the IPO market where it now makes sense for the company to price below the actual value they could get, such that, uh... Because here's the thing. We're talking about the fact that it was up 48%. That's, it's the only time you have this branding event to be kind of the most successful, or one of the more successful IPOs of the year. And people say, "Well, they left money on the table 'cause they could have priced it higher." When you're talking about a float of 20%, maybe you lose 2% of the company, but to be one of the most successful IPOs of the year and set the tone for your company, it's worth the dilution. So, this is the racket, and it is a racket. The investment banks say, "Price it below what it's worth, and it's good branding, it creates nice momentum, nice halo for you, you only give up a little bit of dilution. And we, the investment bank, get to essentially give free money to our institutional clients who generate fees for us." Now, the unfortunate thing is the average retail investor doesn't get to participate. They have to buy it at 47 bucks, even though it priced at 34, I think.

3. KSKara Swisher2:03

   Mm-hmm. Mm-hmm.

4. SGScott Galloway2:04

   So, it's a racket. It's another example of a transfer of wealth from lower-middle-income homes to institutions and rich people, or people with access. Some people would argue, "Well, Vanguard, Blackstone have a lot of money from firemen and teachers, and they get to participate." But be clear, the IPO market is an insider game, and it is a bit of a fixed racket.

5. KSKara Swisher2:24

   Yeah. Yeah. Where's it gonna go from here? I think they'll just have to... Now, they'll be on the basics of what their business is like going forward.

6. SGScott Galloway2:32

   There's only one thing that matters from this point forward. Right now, it's o-

7. KSKara Swisher2:35

   Mm-hmm.

8. SGScott Galloway2:35

   Right now, on its basic numbers and its growth, it's overvalued. If they show any momentum, that they are able to better monetize that Niagara Falls of traffic, the stock will go up from here. If they do not show momentum around monetization of their traffic, it's gonna go way down. It's... All I can tell you is, in a year, the stock will not be here.

9. KSKara Swisher2:57

   Yeah.

10. SGScott Galloway2:57

    But global brand-

11. KSKara Swisher2:57

    Yeah, I would agree. I think they've got it. It's gonna be in the... But it's still a very sm- it's very Snapchatty. It feels very Snapchatty and very great, a good product. We'll see if they can n- look, like, better than what it is. I, I, I like the people who run it and it's still small. It's still a very small social media site.

12. SGScott Galloway3:13

    But, but the-

13. KSKara Swisher3:14

    We'll see.

14. SGScott Galloway3:14

    ... the contrast with Snap is Snap had much better user interface-

15. KSKara Swisher3:17

    Mm-hmm.

16. SGScott Galloway3:17

    ... in my opinion, was probably more innovative.

17. KSKara Swisher3:20

    Mm-hmm.

18. SGScott Galloway3:20

    Great, better monetization, but didn't have nearly the traffic-

19. KSKara Swisher3:26

    Mm-hmm.

20. SGScott Galloway3:26

    ... of Reddit.

21. KSKara Swisher3:26

    Mm-hmm.

22. SGScott Galloway3:26

    And I think the market is deciding that the harder part is to get the traffic.

23. KSKara Swisher3:31

    Okay.

24. SGScott Galloway3:31

    That you can probably figure out the other stuff, 'cause this is trading... I mean, this is trading at a rich valuation. Now, as a segue to Truth Social-

25. KSKara Swisher3:40

    Mm-hmm.

26. SGScott Galloway3:40

    Okay, let's talk about NVIDIA. NVIDIA is arguably the eye of the storm for hype around AI, and it's trading at 37 times sales. Oh my God, that's insane, right? 37 times sales. Reddit's trading at 11 times. So, 11 for Reddit, digital media, potential huge growth, we'll see. Uh, NVIDIA, arguably hottest company in the world, 11,000 people turn out (laughs) like-

27. KSKara Swisher4:01

    Mm-hmm.

28. SGScott Galloway4:02

    ... like a Justin Bieber concert or a bands like concert at the San Jose Stadium to see Jensen Huang speak, The Financialization, the, uh, idolatry of innovators and billionaires. Anyways, that's trading at 37 times sales. Truth Social is trading at 1,500 times sales. I mean-

29. KSKara Swisher4:21

    Uh.

30. SGScott Galloway4:21

    ... you wanna talk about (laughs) a company that is Jenga or a house of, house of cards?

Episode duration: 8:16