Reddit Inc. Its investors are seeking to raise up to $748 million in one of this year’s biggest initial public offerings, according to people familiar with the matter.
The social media platform and some of its current shareholders plan to sell 22 million shares for $31 to $34 each, said the people, who spoke on condition of anonymity because the information was not yet public. As Bloomberg News reported, the company was seeking a valuation of up to $6.5 billion upon listing.
The people said the company has about 1.76 million shares lined up for the IPO to be purchased by users and moderators who created accounts before Jan. 1. These shares are not subject to a lock-up period, meaning owners can sell them on the IPO, according to Reddit’s February filing with the U.S. Securities and Exchange Commission.
A Reddit representative declined to comment.
Reddit’s review
Reddit’s more than two-year journey to listing reflects the market’s ups and downs, starting with its first confidential filing in 2021, when initial public offerings on U.S. exchanges reached an all-time record of $339 billion, according to data compiled by Bloomberg. Reddit raised $10 billion in funds that year, and Bloomberg News reported the following year that the company could be worth as much as $15 billion in an IPO.
Meanwhile, U.S. IPOs fell, reaching just $26 billion last year, the data shows. In January, Bloomberg News reported that Reddit was weighing feedback from early meetings with potential IPO investors and was considering a valuation of at least $5 billion.
The company is a high-profile addition to this year’s list of new and future public companies. The largest of these listings was the $1.57 billion offering from Amer Sports Inc. in January. Astera Labs Inc.a software maker focused on artificial intelligence said in a filing on Friday that it would seek up to $534 million in its IPO, likely to follow Reddit’s.
Read more: Intel-backed Astera is targeting a $534 million IPO with AI Appeal
Reddit’s listing is supported by IPO candidates such as: B. observed closely Microsoft Corporate-backed data security startup Rubric Inc. and healthcare payment companies Waystar Technologies Inc. Their considerations come after a quartet of US IPOs led by the semiconductor designer Arm Holdings PlcSeptember’s $5.23 billion offering failed to spark a lasting market recovery.
Shrinking losses
Founded in 2005, Reddit averaged 73.1 million daily active unique visitors in the fourth quarter, according to its February filing. 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, which owns Conde Nast, which bought Reddit in 2006 and spun it off in 2011.
Reddit said its millions of loyal users and moderators pose both risks and benefits to the company. Reddit users have historically had a combative relationship with the site, sparking revolts against everything from racism on the platform to executives’ personnel decisions.
Meme stocks
Thousands of members of the WallStreetBets forum – which has around 15 million users and has helped popularize meme stocks like… GameStop Corp. – voted to promote a forum post on the topic Short Selling Reddit Stocks when trading begins. Their reasons ranged from the company’s lack of profitability to competition concerns.
The IPO is led by Morgan Stanley, Goldman Sachs Group Inc., JPMorgan Chase & Co. And Bank of America Corp., according to Reddit’s filing. The company plans to trade its shares on the New York Stock Exchange under the symbol RDDT.
Reddit co-founder and Chief Executive Officer Steven Huffman said in a signed letter included in the filing that the company has many opportunities to grow both the platform and the business.
“Advertising is our core business, and advertisers of all sizes have discovered that Reddit is a great place to find willing 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 licensing
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 it entered into data license agreements in January with a total contract value of $203 million and terms ranging from two to three years. The company expects to generate at least $66.4 million in revenue from these agreements this year, according to the filing.
Reddit also announced a deal with Alphabet Inc GoogleThis allows Google’s AI products to use Reddit data to improve their technology. Improving large language models often requires large amounts of human-generated content.
Huffman owns shares that give him 3.5% of the voting rights. These include Class B shares, which carry 10 votes each, compared to one vote each for the Class A shares to be sold in the IPO, according to the filing. Huffman also has a proxy voting agreement with Advance.
Other major shareholders include Chief Operating Officer Jennifer Wong as well FMR LLC and companies affiliated with OpenAI CEO Sam Altman, Tencent holdings Ltd., Vy Capital and Quiet capital And Tacit capitalthe file says.
Huffman’s co-founder, venture capitalist Alexis Ohanian, is not listed among investors with ownership of 5% or more and is not identified elsewhere in the filing.
– With assistance from Priya Anand, Ryan Gould and Katie Roof