Reddit prepares to sell shares to public

SAN FRANCISCO — Reddit, that vast, lively and sometimes chaotic repository of internet discussion, is expected to carry a valuation up to $6.4 billion when it conducts its initial public offering on the stock market.

The offering also makes Reddit one of the first online companies to offer shares to its contributors — the “Redditors” who comment on its boards and the moderators who manage them. That’s a break with traditional IPO practice, in which initial shares are typically sold to institutional investors and fund managers, who then begin trading the stock on the open market. Adding the company’s users to the mix could make for a much livelier offering, and not necessarily in a good way.

It could be an interesting ride.

What are the details of the IPO?

Reddit plans to list 22 million shares at a price between $31 and $34, according to the latest version of the IPO prospectus it filed with the Securities and Exchange Commission. The company stands to take in between $473.6 million and $519.4 million from the sale of roughly 15.3 million shares.

Reddit’s existing investors will sell an additional 6.7 million shares in the offering, raising between $208.4 million and $228.6 million for their own portfolios. Reddit itself won’t benefit from those sales.

What’s different about the Reddit IPO?

Reddit also plans to sell up to 1.76 million shares — roughly 8% of the total offering — to a mix of certain board members and socalled “friends and family members” of certain board members and employees. Plus, of course, the moderators and Redditors who make Reddit what it is.

The wild card here is that these stock purchasers, who will pay the IPO price for their shares, won’t be bound by “lock-up agreements” that require company officers and employees to hold their shares for a fixed period of time — potentially as long as six months. That means Redditors and moderators will be able to sell their shares immediately if they wish.

Can I get in on this offering?

If you don’t already have a Reddit account, you’re probably out of luck. The offering is only available to users who had established accounts as of Jan. 1.

Beyond that, shares will be distributed to Redditors and moderators via a formula that accounts for their measurable contributions to the discussion boards. Redditors with high “karma” scores — a measure of their contributions to the community, such as posts that other Redditors find useful, amusing or insightful — will be grouped into six priority tiers for access to the stock offering.

Moderators who have taken significant numbers of “moderator actions” will likewise be sorted into those tiers. Such actions can include anything from designing a new discussion group — aka a “subreddit” in the jargon of the site — to removing spam or duplicate posts, to enforcing subreddit rules. Moderators will also be rated on membership trends in their subreddits.