Reddit Inc. and its selling shareholders $748 million, pricing shares in an initial public offering at the top of the marketed range, the second big tech listing in as many days.
The social media platform, along with other senior executives and employees, sold 22 million shares for $34 per share, according to a statement confirming an earlier report by Bloomberg News. Shares in the IPO were marketed at a price range of $31 to $34.
At its IPO price, Reddit's market cap is $5.4 billion based on outstanding shares listed in its filings with the US Securities and Exchange Commission. Including stock options and restricted stock units, Reddit's fully diluted valuation is close to $6.4 billion. That's down from $10 billion in a funding round in 2021, when Reddit first launched plans for an IPO.
Reddit is a high-profile addition to the list of newly public companies and those that will go public in 2024. The largest of these lists was the offering by Amer Sports Inc. Valued at $1.57 billion in January.
Track List View Astera Labs Inc. Worth $713 million in one day. Astera, an AI-focused semiconductor communications company, priced its shares above its marketed range and then jumped 72% in its trading debut on Wednesday.
Bloomberg News reported earlier Wednesday that Reddit and its shareholders were expecting the IPO to be priced at or above the top of the marketed range. The Wall Street Journal had reported the stock price earlier.
The IPO is led by Morgan Stanley and Goldman Sachs Group Inc. JPMorgan Chase & Co. and Bank of America Corp., according to Reddit filings. Reddit shares are scheduled to begin trading Thursday on the New York Stock Exchange under the symbol RDDT.
San Francisco-based Reddit's more than two-year-long effort to list reflects the ups and downs of the market, starting with its secretive initial filing in 2021, when initial public offerings on U.S. exchanges hit an all-time record of $339 billion, according to compiled data. By Bloomberg. Data show that initial public offerings in the United States have declined since then, reaching just $26 billion last year.
Reddit's IPO tops big listings in September by U.S. tech companies Instacart, which raised $660 million, and Klaviyo Inc., with a $659 million offering. Those IPOs, along with British chip designer Arm Holdings' $5.23 billion offering — the largest of 2023 — failed to spark a rush of listings, but the market has improved since then.
Data show that so far this year, nearly $8.7 billion has been raised through initial public offerings on US stock exchanges. That's about 150% more than the total at this point last year.
Strong showings by Reddit and Astera provide a market temperature check for other IPO candidates like Rubrik Inc. Data security startup backed by Microsoft Corp and Waystar Technologies Inc. To pay for health care.
Founded in 2005, Reddit averaged 73.1 million unique daily active visitors in the fourth quarter, according to its filings. 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 the previous year.
About 8% of the IPO shares are allocated to Reddit users and moderators who created accounts before January 1, as well as some board members, friends and families of some employees and managers. These shares will not be subject to sequestration, meaning holders can sell them on the opening day of trading, according to Reddit filings.
Reddit's largest shareholder is Advance Magazine Publishers Inc., part of the publishing empire of the Newhouse family that owns Conde Nast, which bought Reddit in 2006 and spun it out in 2011.
Reddit said millions of loyal users and moderators pose a risk as well as a benefit to the company. Redditors have a historically combative relationship with the site, launching rampages over everything from racism on the platform to hiring decisions made by executives.
Thousands of members of the WallStreetBets forum — which has about 15 million users and has helped popularize meme stocks like GameStop Corp. — voted. – To promote a forum post about shorting Reddit stock when trading begins. Their reasons varied from the company's lack of profitability to competitive concerns.
Reddit co-founder and CEO Steve Huffman said in a signed letter included in the filings that the company has many opportunities to grow both the platform and the business.
“Advertising is our number one business, and advertisers of all sizes have discovered that Reddit is a great place to find high-intent customers they can't reach anywhere else,” Hoffman said. “Advertising on Reddit is evolving rapidly, and we are still in the early stages of growing this business.”
Reddit said it is in the early stages of allowing third parties to license access to data on the platform, including training AI models. The company said that in January it entered into a data licensing arrangement with a total contract value of $203 million and terms of between two and three years. It expects at least $66.4 million in revenue from those agreements this year, according to filings.
Reddit also announced a deal with Alphabet Inc.'s Google, allowing Google's AI products to use Reddit data to improve their own technology. Large language models often need large amounts of human-generated content to optimize.
Hoffman owns shares that will give him 3.3% of voting power after the offering. This includes Class B shares, which will each have 10 votes compared to one vote for each Class A share that will be sold in the IPO, filings show. Huffman also has a voting proxy agreement with Advance.
Other major shareholders include Chief Operating Officer Jennifer Wong, as well as FMR and entities affiliated with OpenAI CEO Sam Altman, Tencent Holdings Ltd., Vy Capital, Quiet Capital and Tacit Capital, according to the filings.
Overall, Hoffman and these investors own about three-quarters of the voting rights of shareholders after the IPO.
Hoffman'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 filings.
