- Reddit is gearing up to launch its IPO on Thursday
- The company will list shares on the New York Stock Exchange under ticker symbol “RDDT”
- Reddit was founded in 2005 and has grown to have more than 70 million users peruse its website daily as of 2023
- In 2023, Reddit generated more than US$810 million in revenue primarily from advertising
Reddit (NYSE:RDDT) is gearing up to officially list its shares for trading on Thursday, and the internet has been buzzing about its upcoming initial public offering (IPO).
If you’re unfamiliar, Reddit is essentially an online – and often chaotic – discussion forum where users, or “Redditors” share content that is socially curated and promoted by site members.
With its headquarters in San Francisco, the website was launched in 2005 by Steve Huffman and Alexis Ohanian and has grown to have more than 70 million users peruse its website daily as of 2023.
Also in 2023, the website generated more than US$810 million primarily from advertising. In 2021 Reddit was already valued at $10 billion.
Now that the online forum is gearing up to go public, here’s everything you need to know about Reddit’s IPO.
Details of Reddit’s IPO
According to its filing with the U.S. Securities and Exchange Commission (SEC), Reddit will be listing 22 million shares at a price between $31 and $34. It is estimated that it will raise between $473.6 million and $519.4 million from the sale of roughly 15.3 million shares.
Existing Reddit investors will sell 6.7 million shares that will raise between $208.4 million and $228.6 million for their own portfolios, meaning those funds won’t go to Reddit.
As of Thursday, Reddit will have its shares listed on the New York Stock Exchange (NYSE) under the “RDDT” ticker symbol.
How is Reddit’s IPO different?
Reddit is also selling roughly 8 per cent of the total offering to board members and alleged friends and family members of board members and employees.
The SEC filing also says that users and moderators who created an account on or before Jan. 1, 2024, are potentially eligible for the directed share program, but must reside in the United States and be at least 18 years of age. Eligible users and moderators are also to be in good standing on the platform and cannot be current or former Reddit employees.
These stock purchasers essentially won’t be bound by the required period to hold onto their shares and will be able to immediately sell their stocks if they choose to do so.
How have other social media IPOs done?
Reddit is not the first social media platform to go public – in fact, far from it. Companies such as Meta Platforms (NASDAQ:META) – formerly Facebook, Inc., which includes Facebook, Instagram, Threads and WhatsApp among others; Snapchat (NYSE:SNAP) and Twitter (now delisted after going private), have all previously raised significant IPOs.
Case in point, Facebook went public in 2012 and, at the time, had one of the largest and most anticipated IPOs in history. On its first day of trading, Facebook shares closed at $38.23, above its $38 IPO price.
Now, 12 years later and branded under the Meta Platform, shares of Meta are $496.24, representing a 1,198.04 per cent increase over that time.
Formerly Twitter, X launched its IPO on the NYSE on Nov. 7, 2013, with the stock symbol TWTR and opened at $45.10.
Twitter was a public company for only nine years, however, and was delisted from the NYSE in October 2022 after Elon Musk’s acquisition of the social media platform. At the time of its delisting, shares of Twitter were trading at $53.70.
Snapchat (NYSE:SNAP), an instant messaging multimedia platform, went public in 2017 and launched its IPO at $17 and closed its first day of trading at $27.90. It reached a high of $83.11 in September 2021 but has dipped significantly down to $11.05 as of Tuesday.
Pinterest (NYSE:PINS) is another platform that had lots of buzz around its IPO when it went public in April 2019 at a valuation of $10 billion. Pinterest shares opened at $24.40 and reached a high of $85.31 in April 2021. As of the time of this writing, Pinterest shares sit at $33.89, representing a 38.89 all-time increase.
The bottom line
It is estimated that Reddit’s IPO is between four and five times oversubscribed, which Reuters has reported makes it likely the platform will attain its $6.5 billion valuation.
After its official launch into the stock market, it is projected the discussion platform will have roughly $1.5 billion in cash and equivalents, against no debt and relatively minimal other liabilities.
Investors should keep in mind that oversubscription doesn’t necessarily mean a strong performance in its stock market debut, but given the company’s strong balance sheet its future is promising going forward.
As always, however, investors are encouraged to do their own due diligence before making any investment decision.
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