Reddit Inc. released information about what is expected to be one of the largest IPOs of the year. The company and a few of its current shareholders are looking to raise upto $748 million. Here’s all you need to know about the Reddit IPO.
According to a filing made on Monday, Reddit and the holders intend to sell 22 million shares for $31 to $34 apiece. The company will sell about 15.3 million of those shares, with the remaining shares being purchased by investors who are Reddit staff members.
Based on nearly 159 million outstanding shares, Reddit, whose users contributed to the 2021 meme stock frenzy, would have a market value of $5.4 billion at the top of that range. According to a filing with the US Securities and Exchange Commission, the company’s valuation, fully diluted to include restricted share units and employee stock options, would be approximately $6.4 billion.
A portion of the Reddit IPO shares—roughly 8%—will be reserved for Reddit users and moderators
A portion of the IPO shares—roughly 8%—will be reserved for Reddit users and moderators who opened accounts before January 1st, in addition to a few board members and the friends and relatives of certain directors and employees. As per Reddit’s filing, which validates an earlier report, those shares won’t be locked up, so their owners can sell them on the first day of trading.
According to Reddit’s filings, Morgan Stanley, Goldman Sachs Group Inc., JPMorgan Chase & Co., and Bank of America Corp. are leading the IPO. Reddit intends to use the ticker symbol RDDT to denote its shares’ trading on the New York Stock Exchange.
According to people familiar with the situation who asked not to be named because the information was confidential, the company plans to price the IPO on March 20 and start trading the following day. A request for comment regarding the timing was not immediately answered by a Reddit representative.
What is Reddit’s valuation?
Beginning with its first confidential filing in 2021, when IPOs on US exchanges set an all-time record of $339 billion, Reddit’s more than two-year journey to listing reflects the ups and downs of the market, as per data compiled by Bloomberg. In the year that it raised capital, Reddit was valued at $10 billion. The following year, Bloomberg News revealed that the platform’s potential IPO valuation could reach $15 billion.
According to the data, IPOs in the US fell sharply and only reached $26 billion last year. According to a January Bloomberg News article, Reddit was considering a $5 billion valuation after receiving feedback from early meetings with possible IPO investors.
The business is a well-known addition to the crop of recent and soon-to-be public firms for this year. Amer Sports Inc.’s $1.57 billion offering in January was the largest of those listings. Artificial intelligence-focused software maker Astera Labs Inc. announced in a filing on Friday that it will pursue up to $534 million in its initial public offering (IPO), which is expected to take place before Reddit’s.
IPO candidates like Microsoft Corp.-backed data security start-up Rubrik Inc. and health-care payments company Waystar Technologies Inc. will be closely observing Reddit’s listing. Their discussions follow the failure of four US listings, spearheaded by semiconductor designer Arm Holdings Plc’s $5.23 billion offering in September, to spark a long-term market recovery.
According to its filings, Reddit, which was founded in 2005, had an average of 73.1 million daily active unique visitors in the fourth quarter. In 2023, the business recorded a net loss of $91 million on $804 million in revenue, down from a net loss of roughly $159 million on $667 million in revenue the previous year.
Advance Magazine Publishers Inc., a Newhouse family publishing empire division that also owns Conde Nast, is Reddit’s largest shareholder. Conde Nast acquired Reddit in 2006 and spun it out in 2011.
Reddit stated that it is just now beginning to grant outside parties license access to its data for purposes such as building AI models. According to the company, it signed data licensing agreements in January with terms ranging from two to three years and a total contract value of $203 million. Based on the filings, it anticipates earning at least $66.4 million from those agreements this year.
Reddit and Google’s partnership
Reddit and Alphabet Inc.’s Google have also announced a partnership that will let Google’s AI products leverage Reddit data to advance their technological capabilities. To get better, large language models frequently require enormous amounts of content created by people.
After the offering, Huffman will have 3.3% of the voting power due to his ownership of shares. According to the filings, this includes Class B shares, which will have ten votes each as opposed to the Class A shares sold in the IPO’s one vote per share. Additionally, Huffman and Advance have a voting proxy agreement.
According to the filings, other significant shareholders include Tencent Holdings Ltd., Quiet Capital, Tacit Capital, Vy Capital, OpenAI Chief Executive Officer Sam Altman’s affiliated companies, and Chief Operating Officer Jennifer Wong.
After the IPO, Huffman and those investors will collectively own roughly 75% of the voting rights of shareholders. Venture capitalist Alexis Ohanian, Huffman’s fellow co-founder, isn’t mentioned in the filings anywhere else or among the investors with stakes of 5% or more.