Reddit is on the path to public trading, aiming for a valuation of $6.5 billion. Reuters reports that the social media platform’s initial public offering (IPO) has attracted considerable attention, becoming oversubscribed by four to five times. This level of interest from investors underscores the anticipation surrounding Reddit’s transition to a publicly traded company. Despite achieving a $10 billion valuation in its last fundraising round in August 2021, the current target represents a reduction. The IPO price range is determined to be between $31 and $34 per share.
The company, headquartered in San Francisco, has chosen the New York Stock Exchange for its listing. It plans to trade under the ticker RDDT. Notably, Reddit has disclosed holdings in Bitcoin (BTC), Ethereum (ETH), and Polygon (MATIC) in its IPO filing. The move to go public comes at a time when the market for IPOs is less welcoming than in previous years. However, the enthusiasm for Reddit’s offering suggests a strong belief in its potential among investors.
Reddit reports mixed financial results in 2023
In the financial realm, Reddit has reported a net income of approximately $18.5 million for the last quarter of 2023. Despite this, the year concluded with a net loss of $90.8 million. The company’s decision to pursue an IPO is aimed at raising $748 million. To achieve this, Reddit plans to offer more than 15.2 million shares of its Class A common stock. Additionally, there will be 6.7 million shares offered by selling stockholders.
In a departure from the norm, Reddit will allow some of its employees to sell shares during the IPO. This strategy differs from the typical approach of imposing a lock-up period. Such periods usually prevent early selling, which might adversely affect the stock price. Moreover, the company is reserving shares for top users with high “karma.” This innovative move acknowledges the value of the platform’s community.
Ownership and market conditions
Ownership of Reddit includes significant shares held by co-founder and CEO Steve Huffman, who owns 3.3% of the shares. Other major shareholders include Condé Nast’s parent company, Advance Publications, with a 30.1% stake, Tencent at 11%, and OpenAI CEO Sam Altman holding 8.7%. The decision to aim for a lower valuation reflects the current chilly IPO market. Despite these conditions, Reddit’s IPO has generated significant interest.
The IPO market in 2024 has seen 33 offerings so far, marking a 10% increase over the same period in 2023. This comes after a global downturn in IPOs during 2023, which saw the lowest number of public offerings since 2019. This trend underscores the challenges and opportunities within the current economic landscape for companies looking to go public.
Reddit’s move to enter the public market is a significant step for the company, reflecting its growth and the evolving digital landscape. The company’s strategic decisions, from share allocation to setting its IPO price, are geared towards capitalizing on the interest of investors. As the IPO date approaches, the market’s response will be a key indicator of Reddit’s standing in the public domain and its prospects.
