Starting
today, Reddit stock hits the market. The company set
its initial public offering (IPO) price at $34 per share on Wednesday evening
and is ready to commence trading on Thursday on the New York Stock Exchange
(NYSE) with the symbol RDDT.
Reddit filed for its IPO about a month ago, after initially
aiming for a listing in 2021 with a valuation of $15 billion. However, due to a
downturn in tech stocks and a softening in the IPO market, the company had to
adjust its expectations downward.
The
social media platform is now valued at $6.4 billion through its IPO, at the top
end of its own estimates. A total of 22 million shares will be available for
public ownership, with 8% reserved for eligible users and moderators. Reddit
raised $748 million in the offering before going public.
The
pricing of the IPO was seen as a positive sign for startups and venture
capitalists, who view Reddit’s offering as a litmus test for private tech
companies eyeing public markets. With only just over 100 companies going public
in the United States last year, a quarter of the number in 2021, Reddit’s IPO
holds significance. Its success indicates a potential resurgence in the IPO
market.
The IPO
is a win for Reddit’s major shareholders, including co-founder Steve Huffman
with a 3.3 percent stake, Advance Magazine Publishers affiliated with Condé
Nast’s parent company, and Tencent Cloud Europe, a unit of the Chinese internet
giant Tencent. However, investors have expressed concerns that some Reddit
users might try to manipulate the stock price. A portion of Reddit’s IPO
is allocated to its users, including unpaid moderators, who are not obligated
to hold onto their shares and could sell them immediately.
The IPO
arrives as Reddit aims to reduce its yearly losses and explore new revenue
streams, such as a partnership with Google allowing the tech
giant to utilize Reddit users’ posts to train its AI models. Reddit’s vast
user-generated data has made it attractive for companies looking to enhance AI
tools like ChatGPT and Google Gemini.
However,
Reddit has never recorded a profit in its 18 years as a private company.
Despite generating $804 million in revenue in 2023, it incurred a loss of $91
million. Additionally, there’s a looming threat from within its chat rooms.
WallStreetBets, the notorious trading forum and origin of meme stocks, has not
endorsed the IPO and has even threatened to short the stock.