The 19-year-old California-based social media giant Reddit, whose website runs millions of online communities, priced its initial public offering (IPO) on Wednesday at $34 per share, above the predicted range.
An announcement stated that the IPO raised $519 million and valued the business at around $6.5 billion. Reddit had projected a share price of $31 to $34.
Under the ticker code “RDDT,” Reddit will make its public market debut on Thursday, March 21. This will be the company’s first big social media launch since Pinterest’s in 2019 and one of the few venture-backed digital deals of the previous two years. Reddit sold 15.28 million shares in the offering, and current stockholders sold an additional 6.72 million.
Reddit Lowers Valuation for IPO Amidst Dry Tech Market
From its $10 billion private market valuation during the height of the tech boom in 2021, the company is now receiving a haircut. In 2022, investors withdrew from riskier assets due to skyrocketing inflation and rising interest rates, which ultimately compelled startups to reduce their operations, lower their valuations, and prioritise profits above growth.
As investors flocked to anything involving artificial intelligence, Astera Labs, a US firm that makes data centre gear, saw a 72% increase in share price after going public on Wednesday. Only a handful of digital companies, including Instacart, Klaviyo, and Arm Holdings, have maintained offerings during the more than two-year dry spell that has gripped the IPO market. Despite being successful on an EBITDA basis, Instacart and Klaviyo were also the two major IPOs for 2023 that received chilly reactions on Wall Street last year.
Alphabet and Meta are two major competitors for Reddit’s primary business, which is internet advertising. According to its prospectus, the company’s competitors also include Wikipedia, Amazon’s Twitch streaming service, X (Formerly known as Twitter), Pinterest, Discord, Snap, and Wikipedia.
Revenue Growth Despite Continued Losses
Revenue climbed by 20% to $804 million in 2022 from $666.7 million in 2022. Its 2023 net loss of $90.8 million was a decrease from the $158.6 million net loss it reported in the year prior.
According to the company’s papers, data licensing has the potential to be a lucrative business, and in 2024, it expects to recognise sales for around $66.4 million. Recently, the firm and Google strengthened their cooperation, giving the search engine giant greater access to Reddit data for purposes such as AI model training. According to a recent filing, the company sold $203 million worth of contracts to AI businesses in January for access to its data.
Reddit said last week that the Federal Trade Commission, an independent agency of the United States government, had written to the business to enquire about its policies around data licensing.
Some of Reddit’s most prominent moderators and users, referred to as Redditors, were offered the opportunity to purchase stock through a directed-share program as part of the platform’s first public offering. Previously, Airbnb, Doximity (an online networking platform for medical professionals), and Rivian (an American-based EV firm) adopted this concept to reward their most loyal consumers.