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Reddit, the popular social media platform renowned for its diverse web forums covering topics ranging from mainstream news to niche interests, is gearing up for its highly anticipated initial public offering (IPO) with a target valuation of close to $6.5 billion.
According to a filing released on Monday, Reddit and its existing shareholders intend to sell approximately 22 million shares at a price range of $31 to $34 per share. The projected valuation accounts for the fully diluted share count, encompassing all potential shares, not just those immediately outstanding.
In a notable move, Reddit has allocated around 1.76 million shares for certain users and moderators, commonly referred to as Redditors, who created their user accounts before January 1. These Redditors will have the opportunity to purchase shares and subsequently trade them on the open market, bypassing the typical lock-up period that restricts shareholders from selling their shares for six months following the IPO.
Of the 22 million shares issued in the offering, Reddit plans to sell approximately 15.3 million shares, potentially raising $520 million at the top end of the price range. Existing stakeholders, including CEO Steve Huffman, are set to sell a combined 6.7 million shares.
Investors are closely monitoring Reddit’s IPO, which marks the first major tech debut of the year and the first social media IPO since Pinterest went public in 2019.
In 2021, Reddit confidentially filed a draft of its public offering prospectus with the SEC. The platform raised $1.3 billion in funding that same year, boasting a private market valuation of $10 billion, according to PitchBook.
Reddit reported annual sales of $804 million in 2023, representing a 20% year-over-year increase from $666.7 million in 2022. Despite the revenue growth, the company recorded a net loss of $90.8 million for 2023, narrower than the $158.6 million net loss reported the previous year.
Among Reddit’s notable shareholders are Tencent, parent company of Condé Nast’s Advance Magazine Publishers, and Sam Altman, CEO of OpenAI, who served on Reddit’s board of directors from 2015 to 2022.
The company cautioned in its filing that Redditors participating in the IPO could potentially lead to increased market volatility for Reddit’s Class A common stock. Similar directed share programs have been implemented by other companies going public, including Doximity, Rivian, and Airbnb.