Ahead of its anticipated public unveiling in New York on Thursday, social media firm Reddit has set its share price at $34 (€31.09), top tier of prior estimates, resulting in a fully diluted valuation of $6.4 billion. The company made the share pricing public in a statement on Wednesday. This valuation, however, is considerably less than the $10 billion it garnered during its last private funding round in 2021.
The share price infers a market capitalisation of $5.4 billion straight after the IPO, with potential options pushing the total value to $6.4 billion. Highlighting confidence in Reddit’s future, the shares were priced at the upper end of the spectrum. Moreover, Astro Labs, a firm connected with AI infrastructure, saw its shares skyrocket by 72% on its Nasdaq debut, thereby bolstering the Reddit IPO.
The share sale raised $519 million for Reddit and an additional $229 million for existing shareholders who divested their stocks during the sale. Around 2 million of the shares have been directed towards dedicated users and moderators of the site. Impressive demand for the IPO saw Reddit’s stock oversubscribed by over ten times.
However, there were investor doubts surrounding the nature of orders boosting demand for the deal, correlating them with “B” level book. To elevate the standard of shares and their purchasers, investment bankers often choose to allocate more to asset managers interested in long-term ownership rather than a rapid profit turn.
Reddit’s IPO, which will be listed on the New York Stock Exchange under the ticker symbol “RDDT,” is the first high-profile company to float in a subdued market over the last two years; it could set the pace for other potential listings throughout this year. Despite this, Reddit’s unique difficulties, like the risk of its shares becoming a “meme stock” and discussions among its infamous users to intentionally short its shares, pose inevitable challenges.
Prior to its IPO, Reddit, headquartered in San Francisco, has enforced stricter moderation policies to bolster its advertising business, which contributed heavily to its $804 million earnings in the preceding year. However, the company has yet to realise an annual profit, having registered a loss of $91 million in 2023 as per official documents.
In its pre-IPO pitch, Reddit disclosed plans to broaden its income sources by integrating ecommerce functionalities and enabling the trading of its data with AI establishments.
Reddit’s CEO, Steve Huffman, offloaded 500,000 shares during the IPO, suggesting that he stands to gain $17 million. He is further expected to benefit from additional stock incentives because the company’s evaluation surpassed $5 billion post-listing. – Copyright The Financial Times Limited 2024.