Reddit Inc. and its selling shareholders raised $748 million and priced their initial public offering shares at the high end of the market price range, making it the second major tech listing in recent days.
The company, along with management and other employees, sold 22 million shares at $34 each, according to a statement confirming an earlier report by Bloomberg News. Shares traded between $31 and $34 at the IPO.
At the IPO price, Reddit's market value would be $5.4 billion, based on outstanding shares listed in a filing with the U.S. Securities and Exchange Commission. Including stock options and restricted stock units, Reddit's fully diluted valuation is nearly $6.4 billion. This is down from the $10 billion in a 2021 funding round when Reddit first began its IPO plans.
Reddit is a notable addition to the list of new and soon-to-be public companies in 2024. The largest of these listings was Amer Sports' $1.57 billion offering in January.
The listing comes one day after the company's $713 million acquisition of Astera Labs Inc. Astera, a semiconductor connectivity company focused on artificial intelligence, soared 72% in its trading debut on Wednesday, with its stock outperforming the market price range.
Bloomberg News reported early Wednesday that Reddit and its shareholders expect the IPO to be priced at or above the high end of the market price range. The stock pricing was first reported by the Wall Street Journal.
The IPO is led by Morgan Stanley, Goldman Sachs Group Inc., JPMorgan Chase & Co., and Bank of America, according to a Reddit filing. Reddit stock is scheduled to begin trading on the New York Stock Exchange on Thursday under the symbol RDDT.
2 years of efforts
San Francisco-based Reddit's more than two-year path to going public began with its first confidential filing in 2021, when the IPO on a U.S. exchange set an all-time record of $339 billion, according to data compiled. , reflecting the ups and downs of the market. By Bloomberg. U.S. IPOs have declined since then, reaching just $26 billion last year, according to the data.
Reddit's IPO surpasses the big September listings by US technology companies Instacart, which raised $660 million, and Klaviyo, which raised $659 million. Those IPOs, along with British chip designer Arm Holdings' $5.23 billion initial public offering (the largest of 2023), failed to start a frenzy of listings, but the market has warmed since then. .
Approximately $8.7 billion has been raised through IPOs on U.S. exchanges so far this year, according to data. This is an increase of about 150% from this time last year.
Reddit and Astera's strong performance will gauge the market temperature for other IPO candidates, including Microsoft Corp.-backed data security startup Rubrik Inc. and healthcare payments company Waystar Technologies Inc.
Loss reduction
Reddit, which was founded in 2005, averaged 73.1 million daily active unique visitors in the fourth quarter, according to filings. The company reported a net loss of $91 million on revenue of $804 million in 2023, compared to a net loss of approximately $159 million on revenue of $667 million in the same period last year. there were.
About 8% of the IPO shares will be set aside for Reddit users and moderators who created accounts before January 1, some board members, and friends and family of some employees and directors. According to Reddit's filing, these shares are not subject to a lockup, meaning owners can sell them on the day trading begins.
Reddit's largest shareholder is Advance Magazine Publishers Inc., part of the publishing empire of the Newhouse family that owns Condé Nast, which acquired Reddit in 2006 and spun it off into its own in 2011.
Reddit said its millions of loyal users and moderators pose both benefits and risks for the company. Redditors have historically had a belligerent relationship with the site, revolting over everything from racism on the platform to executive staffing decisions.
short plan
Thousands of members of the WallStreetBets forum, which boasts about 15 million users and helped popularize meme stocks like GameStop Corp., voted to beef up the forum's posts about short selling at the start of trading on Reddit. . The reasons ranged from the company's lack of profitability to competitive 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 its platform and business. Stated.
“Advertising is our first business, and advertisers of all sizes are finding Reddit to be the best place to find engaged customers they can't reach anywhere else,” Huffman said. “Advertising on Reddit is rapidly evolving, but we're still in the early stages of growing this business.”
AI license
Reddit said it is in the early stages of allowing third parties to license access to data on the platform, including for training artificial intelligence models. The company announced in January that it had signed a data license agreement with a total value of $203 million and a term of two to three years. The company expects to generate at least $66.4 million in revenue from these contracts this year, according to filings.
Reddit also announced a deal with Alphabet Inc.'s Google that will allow Google's AI products to use Reddit's data to improve their technology. Improving large-scale language models often requires vast amounts of human-generated content.
Mr. Huffman owns the stock, which will give him 3.3% of voting rights after the offering. This indicates that Class A shares sold in an IPO will have one voting power, while Class B shares will have 10 voting rights. Mr. Huffman also has a voting representation agreement with Advance.
Other major shareholders include Chief Operating Officer Jennifer Wong, as well as FMR LLC, an affiliate of OpenAI CEO Sam Altman, Tencent Holdings, Vy Capital, Quiet Capital, according to the filing. This includes companies such as Tacit Capital.
Collectively, Mr. Huffman and those investors will own about three-quarters of the shareholder voting power after the IPO.
Huffman's co-founder, venture capitalist Alexis Ohanian, is not listed as an investor with more than a 5% stake and is not named elsewhere in the filing. do not have.
