Reddit and its selling shareholders raised $748 million in an initial public offering, with shares priced at the high end of the marketed price range.
The social media platform, along with its top executives and other employees, sold 22 million shares at $34 each. The shares were priced at $31 to $34 in the IPO.
At the IPO price, Reddit has a market value of $5.4 billion, based on outstanding shares listed in its filings with the U.S. Securities and Exchange Commission. Including stock options and restricted share units, Reddit's valuation is closer to $6.4 billion. That's down from $10 billion in a funding round in 2021, when Reddit first launched its IPO plans.
Reddit is a high-profile addition to this year's list of new and upcoming public companies. The largest of these IPOs was Amer Sports' $1.57 billion offering in January.
The listing comes a day after Astera Labs' $713 million offering. Astera, a semiconductor connectivity company focused on artificial intelligence, priced its shares above the market range and rose 72 percent in their stock market debut on Wednesday.
On Wednesday, Reddit and its shareholders had expected the IPO to be priced at or above the marketed range. The Wall Street Journal previously reported on the price of the shares.
According to Reddit filings, the IPO will be led by Morgan Stanley, Goldman Sachs Group, JP Morgan Chase and Bank of America. Reddit shares are scheduled to begin trading on the New York Stock Exchange on Thursday under the symbol RDDT.
Two year slog
San Francisco-based Reddit's more than two-year-long listing reflects the ups and downs of the market, starting with its first confidential filing in 2021, when initial public offerings on U.S. exchanges reached an all-time record of $339 billion, according to compiled data. Dollar reached by Bloomberg. Data shows U.S. IPOs have fallen sharply since then, reaching just $26 billion last year.
Reddit's IPO surpasses September's major IPOs of U.S. tech companies Instacart, which raised $660 million, and Klaviyo, which raised $659 million. While those IPOs, along with British chip designer Arm Holdings' $5.23 billion IPO – the largest of last year – failed to spark a rush to IPOs, the market has warmed since then.
IPOs on U.S. exchanges have raised nearly $8.7 billion this year, according to the data. As of this writing, that's an increase of about 150 percent over the last year.
Reddit and Astera's strong results provide a market temperature test for other IPO candidates such as Microsoft-backed data security startup Rubrik and healthcare payments company Waystar Technologies.
Losses are decreasing
Founded in 2005, Reddit averaged 73.1 million daily active unique visitors in the fourth quarter, according to its filings. The company reported a net loss of $91 million on revenue of $804 million last year, compared with a net loss of about $159 million on revenue of $667 million a year earlier.
About 8 percent of the IPO shares are reserved for Reddit users and moderators who created accounts before Jan. 1, as well as some board members and friends and family of some employees and directors. These shares are not subject to a lock-up period, meaning owners can sell them on opening day, according to Reddit's filings.
Reddit's largest shareholder is Advance Magazine Publishers, part of the Newhouse family publishing empire that owns Conde Nast, which bought Reddit in 2006 and spun it off in 2011.
Reddit said its millions of loyal users and moderators pose both risks and benefits to the company. Reddit users have historically had a combative relationship with the site, sparking revolts against everything from racism on the platform to executives' personnel decisions.
Shorting plan
Thousands of members of the WallStreetBets forum — which has about 15 million users and has helped popularize meme stocks like GameStop — voted to promote a forum post about shorting the Reddit stocks as they begin trading. Their reasons ranged from the company's lack of profitability to competition concerns.
Reddit co-founder and CEO Steve Huffman said in a signed letter included in the filing that the company has many opportunities to grow both the platform and the business.
“Advertising is our core business, and advertisers of all sizes have discovered that Reddit is a great place to find willing customers they can't reach elsewhere,” Huffman said.
“Advertising on Reddit is evolving rapidly and we are still in the early stages of growing this business.”
AI licensing
Reddit said it is in the early stages of allowing third parties to license access to data on the platform, including to train artificial intelligence models. The company said it entered into data license agreements in January with a total contract value of $203 million and terms ranging from two to three years. The company expects to generate at least $66.4 million in revenue from these agreements this year, according to the filings.
Reddit also announced a deal with Alphabet's Google that will allow Google's AI products to use Reddit data to improve their technology. Improving large language models often requires large amounts of human-generated content.
Mr. Huffman owns shares that will give him 3.3 percent of the voting rights after the offering. These include Class B shares, which carry 10 votes each, compared to one vote each for the Class A shares to be sold in the IPO, filings show. Mr. Huffman also has a proxy voting agreement with Advance.
According to the documents, other major shareholders include Chief Operating Officer Jennifer Wong as well as FMR and companies affiliated with OpenAI boss Sam Altman, Tencent Holdings, Vy Capital, Quiet Capital and Tacit Capital.
Mr. Huffman and these investors will hold approximately three-quarters of shareholder voting rights following the IPO.
Mr. Huffman's co-founder, venture capitalist Alexis Ohanian, is not listed among investors with ownership of 5 percent or more, nor is he identified elsewhere in the filing.
Updated: March 21, 2024, 6:06 am
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