In the world of social media, Reddit is seeking to make a splash with its upcoming initial public offering (IPO), aiming for a valuation of up to $6.5 billion. This move comes as the company plans to price its IPO between $31 to $34 a share, according to a source familiar with the matter.
Reddit, which filed to go public in February, is set to trade on the New York Stock Exchange under the ticker symbol RDDT. The company’s employees will also have the opportunity to sell Reddit stock during the offering. This marks a significant milestone for Reddit, which had a private market valuation of $10 billion when it last raised a funding round of $1.3 billion in 2021, according to PitchBook.
At the top end of the IPO range, shares owned by Sam Altman, the CEO of OpenAI, would be valued at over $400 million. Altman, who led a $50 million funding round into Reddit in 2014, has been a vocal supporter of the platform, describing it as “an example of something that started out looking like a silly toy for wasting time and has become something very interesting.”
Reddit’s shareholder list also includes Tencent and Advance Magazine Publishers, the parent company of Condé Nast. Condé Nast initially bought Reddit a year after its founding by Alexis Ohanian and Steve Huffman, before spinning it out as an independent entity in 2011.
In 2021, Reddit filed a confidential draft of its public offering prospectus with the Securities and Exchange Commission. The company reported $804 million in annual revenue for 2023, marking a 20% year-over-year increase from $666.7 million. Additionally, its net loss narrowed to $90.8 million for 2023 from $158.6 million the previous year.
Reddit’s upcoming IPO will allow its non-employed forum moderators, known as Redditors, to participate in the offering through the company’s “directed share program.” This program is similar to those offered by other companies like Airbnb, Doximity, and Rivian, which allow community members or customers to buy in at the IPO price.
Despite its success, Reddit has faced challenges, including a disagreement with some of its moderators over changes to its application programming interface (API). The company stated that the API-pricing changes were necessary due to its data being used by tech companies for large language models.
Looking ahead, Reddit is developing a data-licensing model to complement its core online advertising business. The company recently expanded its partnership with Google, granting the tech giant access to Reddit’s data.
Reddit’s IPO is set to be the first major tech offering of the year and the first social media IPO since Pinterest’s debut in 2019. With the IPO market expected to improve in 2024, according to John Tuttle, the vice-chair of the New York Stock Exchange, Reddit’s Wall Street debut could signal a new chapter for the platform as it transitions from a “silly toy” to a serious player in the world of social media.
(Source: Financial Times | CNBC | WSJ | Neowin)
