Reddit targets up to $6bn valuation in US IPO
• The IPO will come more than two years after the company began preparations to go public
Reddit is aiming for a valuation of up to $6.4bn in its US initial public offering (IPO), the social media platform said on Monday, as it nears one of the most closely watched market debuts of the past few years.
The company, along with some of its existing investors, is targeting a sale of about 22-million shares, priced between $31 and $34 each, to raise up to $748m.
The IPO, which is a major litmus test of investor appetite for new listings, will come more than two years after the company began preparations to go public. So far in 2024, the IPO market recovery has been uneven.
The targeted valuation, on a fully diluted basis, is less than the $10bn Reddit was valued at after a fundraising in 2021.
After its launch in 2005, Reddit became one of the cornerstones of social media culture. Its iconic logo — featuring an alien with an orange background — is one of the most recognised symbols on the internet.
Its 100,000 online forums, called “subreddits”, allow conversations on topics ranging from “the sublime to the ridiculous, the trivial to the existential, the comic to the serious”, according to co-founder Steve Huffman.
Former US president Barack Obama did an “AMA” (“ask me anything”), internet lingo for an interview, with the site’s users in 2012.
The company’s influential communities are best known for the “meme-stock” saga of 2021, when several retail investors collaborated on Reddit’s “wallstreetbets” forum to buy shares of highly shorted companies such as video game retailer GameStop.
The episode torpedoed hedge funds that had bet against those stocks, and made retail traders a force to reckon with. It was also featured in a 2023 film starring Seth Rogen.
To tap into the retail base, Reddit has reserved 8% of the total shares on offer for eligible users and moderators on its platform, certain board members and friends and family members of its employees and directors.
Such buyers will not be under a lock-up period and could choose to sell their shares on the first day of trading, potentially increasing the price volatility.
“This is a unique IPO and what happens with it is going to be partly driven by the buzz on the platform,” said Reena Aggarwal, director of the Georgetown University Psaros Center for Financial Markets and Policy.
Morgan Stanley, Goldman Sachs, JPMorgan and Bank of America Securities are the lead underwriters for the offering. Reddit expects to list on the New York Stock Exchange under “RDDT”.
Despite its cult-like status among followers, Reddit has lagged the success of contemporaries such as Meta Platforms’ Facebook and Elon Muskowned X.
The company has never turned a profit, and said in its filing earlier that it was “in the early stages of monetising [its] business”.
Reddit had an average of 73.1million daily active “uniques” — users who use its platform at least once a day — in the three months ended December 31 2023, it said.
The company’s approach to content moderation has also been a sticking point with advertisers.
It relies on volunteers from its user base to moderate the content posted on its forums. Moderators can decide to withdraw from their duty at any time, like during 2023, when several quit in protest over the company’s decision to charge thirdparty app developers for access to its data.
“There’s no question that as a public company, Reddit is going to be under much more scrutiny in terms of their platform, what’s being put out on the platform and how it’s being monitored,” Aggarwal said.
“Regulators and policymakers are quite concerned about these issues.”