Reddit IPO Update: Everything you need to know
Reddit, the popular social media platform known for its vibrant communities and role in the meme stock phenomenon, is gearing up for one of this year's most anticipated initial public offerings (IPOs), aiming to raise up to $748 million.
They plan to offer 22 million shares priced between $31 to $34 each, which would value Reddit at about $5.4 billion, or $6.4 billion when fully diluted to account for stock options and restricted shares.
Approximately 15.3 million shares will be sold by Reddit itself, with the remaining portion being offered by existing shareholders, including Reddit employees. An interesting twist is that about 8% of the IPO shares are reserved for Reddit users and moderators who have been part of the community before January 1, as well as for some board members and their close connections. These shares will be uniquely exempt from the usual lock-up period, allowing them to be sold immediately on the day trading begins.
The IPO is being managed by major financial institutions like Morgan Stanley and Goldman Sachs, and Reddit's shares are set to be listed on the New York Stock Exchange under the symbol RDDT. The company targets March 20 for pricing the IPO, with trading expected to kick off the following day.
Reddit's journey to this moment has been a rollercoaster, mirroring the broader fluctuations in the market. The company initially filed confidentially for an IPO in 2021, a record year for IPOs, at a time when Reddit was valued at $10 billion. However, market conditions have since cooled, with IPO activity significantly slowing down in the US last year.
Despite these challenges, Reddit remains a high-profile candidate in this year's IPO lineup, showcasing a substantial user base with 73.1 million daily active visitors in Q4. The platform reported a net loss of $91 million on $804 million in revenue for 2023, improving from the previous year's losses.
Reddit's potential growth areas include advertising and licensing data for AI training, with recent deals, including one with Google, indicating new revenue streams. The company's unique community-driven model, however, poses both opportunities and risks, especially given its users' historically critical stance towards changes on the platform.
As Reddit prepares to go public, the IPO is not just a financial milestone for the company but a test of its ability to balance growth with maintaining the vibrant community culture that has defined its success.
Read Reddit’s S-1 filing here.
Some interesting observations from the Redditors themselves:
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SpyderCall : I wonder if this social media/meme stonk platform will run up after IPO, like all of the meme stonks that are pumped on the platform???
MetaClem : how about you @Ziet Invests , will you participate?
Mcsnacks H Tupack SpyderCall: They are bringing too many shares into a weak market. 25 million shares at that price is going to be a hard sell. Especially once it starts to fall.
SpyderCall Mcsnacks H Tupack: I'm just assuming it will perform poorly like 90% of IPOs. They could possibly have a good first day or couple of week, like COIN or ABNB. But most IPOs will make a drop below IPO price before finally making new highs eventually. correct me if I am wrong, but I think the average is 18 months before an IPO gains any footing in the market.
Ziet InvestsOP MetaClem: not something i fancy based on their valuation and financials…but can’t underestimate the market’s rationale in a bull market haha
Ziet InvestsOP SpyderCall: definitely hard to tell esp during bull market, but when money is cheap (soon), it’s really unpredictable; market will stay irrational longer than we can stay solvent
BelleWeather SpyderCall: The WSB community (subreddit) is planning to short the stock to oblivion as soon as that is possible, so likely no :).
MetaClem Ziet InvestsOP: I heard they bought 1 BTC, not sure if this info helps haha. I certainly look elsewhere since now have more opportunities in the forest
74243160 : Investing in IPOs is usually done as a short-term trade or day-trade for income, which has a lot to do with screening a company, and it is not recommended to get involved in a company with a large market capitalization like this one
BelleWeather SpyderCall: Yes, agreed. Especially a company that has lost money for twenty years straight, massively overpays its CEO and that states it has no path to profitability going forward. I echo your thoughts, add the above and a bumpy market I anticipate in 2025, hence my long dated puts (volatility is slightly more bearable then.)
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