Achi news desk-
Reddit is aiming for a valuation of up to US$6.4 billion in its initial public offering (IPO) in the United States, the social media platform said on Monday, as it nears one of its anticipated stock market debuts during the last few years.
The company, along with some of its existing investors, is targeting a sale of about 22 million shares, at $31 to $34 each, to raise up to $748 million.
The IPO, 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 this year, the IPO market’s recovery has been uneven.
The targeted valuation, on a fully diluted basis, is less than the $10 billion that Reddit was valued at after raising money 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 recognizable symbols on the internet.
Its 100,000 online forums, dubbed “subreddits,” allow conversations on topics ranging from “the sublime to the ridiculous, the trivial to the existential, the comic to the serious,” in according to co-founder Steve Huffman.
The email you need for the day’s top news stories from Canada and around the world.
The email you need for the day’s top news stories from Canada and around the world.
Huffman himself turned to one of the subreddits for help to stop drinking, he wrote in his letter. Former US President Barack Obama also 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 2021 “meme-stock” saga, when several retail investors on Reddit’s “wallstreetbets” forum teamed up to buy shares of deeply shorted companies such as video game retailer GameStop.
The event torpedoed hedge funds that had bet against those stocks, and made retail traders a force to be reckoned with. It was also featured in a 2023 film with Seth Rogen.
To tap into the retail base, Reddit has reserved eight percent of the total shares offered to 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 price volatility.
“This is a unique IPO and what happens with it is going to be driven in part by the buzz on the platform,” said Reena Aggarwal, director of Georgetown University’s 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.”
COMMERCIAL SUCCESS LIMITED
Despite its cult-like status among its followers, Reddit has trailed the success of contemporaries such as Facebook and Twitter Meta Platforms, now known as X.
The company has never turned a profit, and said in its earlier filing that it was “in the early stages of monetizing (its) business.”
Reddit had an average of 73.1 million daily active “uniques” — users who use its platform at least once a day — in the three months ending Dec. 31, 2023, it said.
The company’s approach to content standardization 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, as during 2023, when several quit in protest over the company’s decision to charge third-party app developers for access to its data.
“There’s no question that Reddit, as a public company, is going to be under a lot 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 policy makers are quite concerned about these issues.”
