Open Editor's Digest for free
Rula Khalaf, editor of the Financial Times, picks her favorite stories in this weekly newsletter.
Reddit is seeking a valuation of up to $6.5 billion in its upcoming IPO, which would represent a significant decline from its last private valuation in 2021.
The social media platform was targeting between $31 and $34 per share, according to two people familiar with the situation, giving it an equity value of between $6 billion and $6.5 billion on a fully diluted basis. The price targets were first reported by The Wall Street Journal.
The platform, known for free discussion forums like the WallStreetBets trading group, was valued at $10 billion in its most recent private fundraising in 2021, when technology stocks were buoyed by a boost in online engagement during pandemic stay-at-home orders.
However, as pandemic restrictions lifted and interest rates rose, tech stocks fell — prompting Reddit to pause its IPO plans after secretly filing for a flotation at the end of 2021.
Some of the IPO proceeds will go directly to Reddit through the sale of new shares. A portion will also go to existing shareholders, including employees, according to a person familiar with the matter. However, those who sell shares in the IPO will be prohibited from making further sales for a period after the deal, the person said.
The company also previously said that it plans to allocate a portion of its shares to retail investors and loyal users of its social network.
Reddit may adjust its price range ahead of its promotion, which could begin within weeks, with a possible public listing as early as this month. The company declined to comment.
Reddit has not yet revealed how many shares will be outstanding immediately after the offering. This means that its initial market value could be materially lower than the fully diluted range, which is based on the assumption that any outstanding options are exercised and any associated targets are achieved.
Recommended
Fidelity, which was one of the lead investors in Reddit's 2021 fundraising, valued its stock at more than $35 per share as of last August, according to regulatory filings. Fidelity Growth Opportunities Fund lowered its internal rating to $31.41 per share as of the end of November, representing a nearly 50 percent discount compared to August 2021.
Reddit's listing will represent an important test of investor appetite, as the US IPO market slowly improves after two years of moribund activity.
Most large companies that have listed over the past year have placed a strong focus on profitability. By contrast, Reddit, which is trying to build a largely ad-based business, has had cumulative losses of more than $700 million, including a net loss of $90.8 million in 2023. It warned in its prospectus that it “may not… Never achieve profitability.
Reddit CEO Steve Huffman owns restricted stock that will vest if its market value reaches $5 billion after the offering, according to a company prospectus.
