Reddit Announces IPO Price Range and Valuation, Giving Potential Investors Insight into the Company’s Offering
On March 6, 2023, Reddit made an official announcement regarding the anticipated pricing range for its Initial Public Offering (IPO). The social media platform expects to price its shares between $31 and $34 each. This landmark event marks Reddit as the first social media company to go public in several years, giving potential investors valuable information for their evaluation process.
Details of the IPO and Proceeds
Reddit, along with existing stockholders, plans to offer approximately 22 million shares of Class A stock, which could potentially generate up to $748 million in total proceeds from the offering. The company officially announced its IPO plans last month.
Reddit aims to earn approximately $450 million in proceeds from the IPO if shares are priced at the midpoint of their expected range. These funds will be used primarily for operating expenses and potentially licensing, acquiring, or investing in new technologies, assets, or intellectual property.
Valuation and Market Impact
Reddit is seeking a $6.4 billion valuation through the IPO, which is less than the $10 billion valuation it targeted during its last funding round in 2021. The company’s listing could serve as a bellwether for the larger IPO market, which has been experiencing a slump. Wall Street eagerly awaits a blockbuster listing that could reinvigorate dealmaking in the industry. Additionally, Reddit’s unprofitability might signal investors’ current interest in purchasing shares from a company that has yet to turn a profit.
Financial Performance and Growth
Reddit reported a net loss of $90.8 million in 2023 but revealed that sales were increasing. Revenue grew by 21% year-over-year, reaching a significant milestone of more than $600 million. The company aims to expand its business through new lines, such as licensing data to ai firms, to enhance its financial performance.
Redditors’ Opportunity to Participate
Reddit is making an unprecedented move by reserving 8% of its IPO shares (approximately 1.76 million shares) for its most dedicated users – the Redditors. Users had until March 5 to register their interest in purchasing shares during the offering. These individuals will now have the option to opt-out of buying shares since prices have been determined. By granting Redditors this opportunity, there is a possibility that increased volatility could impact the company’s stock price due to individual retail investors’ propensity for quick selling.
