Reddit Inc. and its investors are seeking to raise up to $748 million in what would be one of the largest initial public offerings so far this year, according to people familiar with the matter.
The social media platform and some of its current shareholders plan to sell 22 million shares for between $31 and $34 each, said the people, who asked not to be identified because the information was not yet public . The company was seeking a valuation of as much as $6.5 billion in the listing, Bloomberg News reported.
The people said the company is setting aside about 1.76 million shares in the IPO that will be purchased by users and moderators who created accounts before Jan. 1. Such shares will not be subject to a lock-up period, meaning owners will be able to sell them on the market. opening day of trading, according to Reddit’s February filing with the U.S. Securities and Exchange Commission.
A Reddit representative declined to comment.
Reddit’s rating
Reddit’s more than two-year effort to go public reflects the market’s ups and downs, dating back to its first confidential filing in 2021, when IPOs on U.S. stock exchanges set an all-time record of $339 billion, according to data compiled by Bloomberg . Reddit raised money that year valuing it at $10 billion, and Bloomberg News reported the following year that it could be valued at as much as $15 billion in an IPO.
Meanwhile, IPOs in the United States have plummeted, reaching just $26 billion last year, the data shows. In January, Bloomberg News reported that Reddit was evaluating feedback from early meetings with potential IPO investors that it should consider a valuation of at least $5 billion.
The company represents a high-profile addition to the roster of new and upcoming public companies. The largest of these listings was Amer Sports Inc.’s $1.57 billion offering in January. Astera Labs Inc., a software maker focused on artificial intelligence, said Friday it will seek up to $534 million in its IPO, which is likely to precede Reddit’s.
Read more: Intel-backed Astera seeks $534 million in AI-powered IPO
Reddit’s listing will be closely watched by IPO candidates such as Microsoft Corp.-backed data security startup Rubrik Inc. and healthcare payments company Waystar Technologies Inc. Their decisions come after a quartet of listings US led by $5.23 from semiconductor designer Arm Holdings Plc. September’s billion-dollar offering failed to trigger a sustained market recovery.
Losses decreasing
Founded in 2005, Reddit averaged 73.1 million daily active unique visitors in the fourth quarter, according to February data. The company reported a net loss of $91 million on revenue of $804 million in 2023, compared to a net loss of about $159 million on revenue of $667 million a year earlier.
Reddit’s largest shareholder is Advance Magazine Publishers Inc., part of the Newhouse family publishing empire that owns Condé Nast, which bought Reddit in 2006 and created it in 2011.
Reddit has said its millions of loyal users and moderators pose risks but also benefits to the company. Redditors have a historically combative relationship with the site, launching riots over everything from racism on the platform to executives’ personnel decisions.
Meme actions
Thousands of members of the WallStreetBets forum — which boasts about 15 million users and helped popularize meme stocks like GameStop Corp. — voted to promote a forum post about shorting Reddit stocks when they start trading. Their reasons ranged from the company’s lack of profitability to concerns about competition.
The IPO is led by Morgan Stanley, Goldman Sachs Group Inc., JPMorgan Chase & Co. and Bank of America Corp., according to the Reddit filing. The company plans to have its shares traded on the New York Stock Exchange under the symbol RDDT.
Reddit co-founder and CEO Steven Huffman said in a signed letter attached to the filing that the company has many opportunities to grow both the platform and the business.
“Advertising is our first business, and advertisers of all sizes have found that Reddit is a great place to find high-intent customers they can’t reach elsewhere,” Huffman said. “Advertising on Reddit is evolving rapidly and we are still in the early stages of growing this business.”
AI License
Reddit said it is in the early stages of allowing third parties to license access to data on the platform, including to train artificial intelligence models. The company said in January it entered into data licensing agreements with a total contract value of $203 million and terms ranging from two to three years. According to the document, a minimum of $66.4 million in revenue is expected from such deals this year.
Reddit also announced a deal with Alphabet Inc.’s Google, allowing Google’s AI products to use Reddit data to improve its own technology. Large language models often require vast amounts of human-generated content to improve.
Huffman owns shares that give him 3.5% of the voting power. This includes the Class B shares which will have 10 votes each compared to one each for the Class A shares to be sold in the IPO, the filing shows. Huffman also has a voting proxy agreement with Advance.
Other large shareholders include Chief Operating Officer Jennifer Wong, as well as FMR LLC and entities affiliated with OpenAI CEO Sam Altman, Tencent Holdings Ltd., Vy Capital and Quiet Capital, and Tacit Capital, according to the filing.
Huffman’s fellow co-founder, venture capitalist Alexis Ohanian, is not listed among investors with stakes of 5% or more and is not named elsewhere in the filing.
— With assistance from Priya Anand, Ryan Gould and Katie Roof