Key Points:
- Reddit plans an IPO to raise over $500 million, with a potential valuation of $6.4 billion. The IPO involves selling 15.3 million shares for $31 to $34 each.
- The company will kick off its roadshow on Monday, seeking investor interest for a New York Stock Exchange listing.
- If successful, Reddit’s market capitalization would range from $5.8 billion to $6.4 billion, notably below its last private valuation of $10 billion in 2021.
- Reddit, known for its advertising business, recorded $800 million in sales last year but has yet to report an annual profit.
Social media giant Reddit is set to embark on its initial public offering (IPO), with plans to raise over $500 million, potentially valuing the company at up to $6.4 billion. The IPO is expected to set a precedent for private start-ups considering public listings in 2024.
Reddit’s roadshow is scheduled for Monday as the company seeks investor interest for a New York Stock Exchange listing. The IPO, managed by Morgan Stanley, Goldman Sachs, JPMorgan, and Bank of America, involves the sale of 15.3 million shares priced between $31 and $34 each.
If successful, Reddit’s market capitalization would range from $5.8 billion to $6.4 billion, notably below its last private valuation of $10 billion in 2021. The IPO could raise around $519 million, with existing shareholders selling an additional 6.7 million shares. Moreover, nearly 2 million shares are reserved for purchase by users and moderators who joined Reddit before January 1.
The IPO assumes significance amid a subdued U.S. IPO market over the past two years. Even recent public listings have necessitated significant valuation discounts compared to their listed counterparts. Reddit’s offering will be closely watched to assess banks’ aggressiveness or caution in the current IPO climate and the balance of institutional and retail investor participation.
Despite U.S. equity markets hitting all-time highs, investors remain highly price-sensitive in the IPO market. Some valued Reddit at $5 billion to $5.5 billion, using Snapchat as a benchmark on the low and Pinterest on the high end to estimate the company’s valuation.
Reddit, known for its robust advertising business that contributed $800 million in sales last year, has never reported an annual profit. In 2023, the company recorded a $91 million loss. The IPO comes with concerns that it could face speculative trading, reminiscent of the “meme stock” phenomenon associated with Reddit traders who rallied around stocks like AMC and GameStop.
Investors are reportedly preparing to make bearish bets against Reddit, anticipating potential volatility. In its prospectus, the company cautioned about the likelihood of trading in its shares being particularly volatile. Founded in 2005 and initially acquired by Condé Nast, Reddit became an independent subsidiary of Advance Publications, Condé Nast’s parent company, in 2011.
