Long-Awaited Reddit IPO Targets $748 Million

The social media network Reddit has revealed that it is seeking a valuation of about $6.5 billion at its imminent flotation on the New York Stock Exchange. 

The company said in a corporate filing with the US Securities and Exchange Commission on Monday that it planned to raise up to $748 million by selling 22 million shares valued at between $31 and $34 each in the largest initial public offering of a social media network in four years.

A flotation, under the ticker symbol RDDT, is expected some time this month and will be the most significant social media IPO since Pinterest in 2019. The user generated and moderated community content, and discussion platform had confidentially filed for an IPO in 2021 but delayed its move because of economic conditions and a poor performance by technology stocks. Uncertainty followed this because of the platform's economic losses.

Reddit, the community-focused message board site, founded in 2005, filed to go public in February, paving the way for it to be the first major social media company to debut on the stock market in years. 

In an offering prospectus, Reddit disclosed its financial performance in preparation for selling shares to investors. The San Francisco-based company reported that its revenue rose more than 20 percent as its losses narrowed last year. It added that it had 73 million daily users and more than 100,000 active communities.

The IPO is being led by Morgan Stanley, Goldman Sachs Group Inc., JPMorgan Chase & Co. and Bank of America Corp., according to Reddit’s filings. Reddit plans for its shares to trade on the New York Stock Exchange under the symbol RDDT.

“Reddit, Inc. is offering 15,276,527 shares of its Class A common stock, and the selling stockholders identified in this prospectus are offering an aggregate of 6,723,473 shares of Class A common stock. We anticipate that the initial public offering price per share of our Class A common stock will be between $31.00 and $34.00,” the startup said in its official offering statment. 

The filing states that the underwriters have reserved up to 1,760,000 shares of common stock, or 8% of the shares offered for sale at the initial public offering price, through a directed share program for eligible platform users and moderators, certain board members, and friends and family members of certain employees and directors.

This means that 8% of IPO shares are reserved for Reddit users and moderators who created accounts before Jan. 1, some board members, and workers and directors' friends and family. According to Reddit's filing, owners can sell such shares on the first day of trading without a lockup.

Reddit's more than two-year journey to listing follows the market's ups and downs, starting with its confidential filing in 2021, when US IPOs set a record of $339 billion, according to Bloomberg.

According to filings, the 2005-founded forum-based American platform Reddit averaged 73.1 million daily active unique visitors in the fourth quarter. A year before, the company lost $159 million on $667 million in revenue. In 2023, it lost $91 million on $804 million.

Reddit is in the early phases of licensing platform data to third parties, including for AI model training. The corporation signed data licensing agreements worth $203 million and lasting two to three years in January. 

Reddit also announced a cooperation with Alphabet Inc.'s Google to strengthen its AI products with Reddit data.

Many large language models need massive amounts of human-generated content to improve.
IPO contenders like Microsoft Corp.-backed Rubrik Inc. and Waystar Technologies Inc. will keep an eye on Reddit's listing.