Reddit Inc., the renowned social media platform, is gearing up for one of the most anticipated initial public offerings (IPOs) of the year, aiming to raise up to $748 million, according to Bloomberg News.
With plans to list 22 million shares priced between $31 and $34, the company seeks a valuation of up to $6.5 billion. In an innovative move, Reddit is allocating approximately 1.76 million shares for purchase by its community of users and moderators, with these shares being exempt from the usual lockup period restrictions.
This strategic decision to involve the platform's dedicated user base in the IPO process underlines Reddit's unique approach to public listing, reflecting its community-driven ethos. The move comes amid fluctuating market conditions that have seen a significant downturn in IPO activity compared to the record highs of 2021. Despite the challenging landscape, Reddit's IPO is poised to invigorate the market, drawing comparisons with other major listings such as Amer Sports Inc.'s $1.57 billion offering earlier this year and Astera Labs Inc.'s upcoming $534 million IPO.
Reddit's journey to the public market has been a complex one, beginning with a confidential filing in 2021 amidst a booming IPO environment. Since then, the company has navigated through valuation adjustments, with initial estimates as high as $15 billion giving way to a more conservative $5 billion in light of investor feedback and market realities.
The platform, founded in 2005, boasts an average of 73.1 million daily active visitors and has shown promising growth, narrowing its net loss to $91 million in 2023 from $159 million the previous year, on a revenue increase from $667 million to $804 million. Advance Magazine Publishers Inc., part of the Newhouse family's publishing empire, remains Reddit's largest shareholder, having acquired and later spun off the company in the mid-2000s.
Reddit's broad and passionate user base is both an asset and a challenge, with the platform's history of user revolts and the ongoing debate over its content and management policies. The IPO's success will depend on balancing the interests and expectations of this vibrant community with the demands of new public investors.
Among the notable aspects of Reddit's strategy is its foray into artificial intelligence (AI) and data licensing. The company has recently entered significant data licensing arrangements, including a notable deal with Google, to enhance AI technologies using Reddit's extensive data pools. This move not only diversifies Reddit's revenue streams but also positions it at the forefront of AI development.
As Reddit prepares to list on the New York Stock Exchange under the symbol RDDT, the leadership, including co-founder and CEO Steven Huffman, remains optimistic about the platform's growth potential, particularly in advertising and AI licensing. Huffman, along with COO Jennifer Wong and other key stakeholders, including OpenAI CEO Sam Altman and entities affiliated with Tencent Holdings Ltd., hold significant shares in the company, highlighting the broad base of support and expectation surrounding Reddit's public debut.
