In a notable development for the technology IPO market, social media titan Reddit has priced its initial public offering (IPO) at the upper end of its indicated range, raising a staggering $748 million.
During the IPO, Reddit and its existing shareholders offered 22 million shares at a price of $34 per share, propelling the platform’s valuation to around $6.4 billion.
It’s noteworthy that Reddit reserved 8 per cent of the total shares for retail investors, qualified users, moderators, specific board members, and associates of its employees and directors.
Opting for a top-tier pricing strategy represents a strategic decision by Reddit, especially after moderating its valuation expectations following a private fundraising round in 2021, where it achieved a valuation of $10 billion.
This move underscores Reddit’s aspirations to leverage the optimistic investor sentiment while solidifying its standing in the fiercely competitive social media landscape.
The success of the IPO injects much-needed momentum into the tech IPO market, which has experienced subdued activity in recent times.
Despite boasting a dedicated user base, Reddit has encountered financial losses since its inception in 2005, lagging behind rivals like Meta Platforms’ Facebook and Twitter in terms of commercial profitability.
The platform’s focus on niche subjects and its relatively lenient approach to content moderation have presented challenges in attracting advertisers, prompting Reddit to explore alternative revenue avenues.
One notable initiative involves Reddit’s collaboration with tech giant Alphabet’s Google, where it provided artificial intelligence training data in a lucrative $66 million deal announced earlier this year.
However, Reddit’s venture into AI training data provision has not been without controversy, with the US Federal Trade Commission launching an investigation into the company’s practices regarding the sale, licensing, and sharing of user-generated content with third parties for AI model training.
This scrutiny underscores the intricacies inherent in Reddit’s operations, heavily reliant on volunteer moderators from its user base to curate content across its 100,000 online forums, or “subreddits”.
Renowned for its influential communities, Reddit gained widespread attention during the “meme-stock” frenzy of 2021, wherein retail investors collaborated on Reddit’s “wallstreetbets” forum to orchestrate stock surges in companies like GameStop.
Despite challenges, Reddit remains a formidable force in the digital realm, boasting an average of 73.1 million daily active users as of the three months that ended December 31, 2023.
With shares slated to commence trading on the New York Stock Exchange under the ticker symbol ‘RDDT,’ Reddit’s IPO marks a significant milestone in its evolution as a key player in the social media landscape.
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