Reddit, the 19-year-old online forum hosting millions of discussions, has set its IPO price at $34 a share, hitting the upper end of its projected range.
As per the press release, the IPO generated $519 million in proceeds and valued the platform at nearly $6.5 billion. Reddit initially aimed to price its shares between $31 and $34.
Thursday marks Reddit’s debut on the public market under the ticker symbol “RDDT,” marking a significant event as the first major social media company to go public since Pinterest’s 2019 IPO.
During the last two years, amidst a scarcity of venture-backed tech ventures, Reddit released 15.28 million shares, while existing shareholders divested an additional 6.72 million.
This valuation reflects a decrease from Reddit’s peak private market valuation of $10 billion in 2021 during the tech frenzy.
Economic factors such as inflation and rising interest rates in 2022 prompted investors to retreat from riskier assets, compelling startups to recalibrate, reassess valuations, and prioritize profitability over rapid expansion.
Coinciding with Reddit’s IPO, data center hardware firm Astera Labs went public on Wednesday, witnessing a 72% surge in its share price, indicating investor enthusiasm for ventures linked with artificial intelligence.
Nonetheless, the IPO landscape has remained parched for more than two years, with only a handful of tech firms, including Instacart, Klaviyo, and Arm Holdings, braving offerings during this period.
During the era of online advertising, Reddit faces stiff competition from industry giants such as Alphabet and Meta. Its competition roster includes Snapchat, X (formerly Twitter), Pinterest, Discord, Wikipedia, and Amazon’s Twitch streaming service.
Despite the competitive landscape, Reddit’s revenue climbed by 20% last year, reaching $804 million, up from $666.7 million in 2022. In 2023, the platform narrowed its net loss to $90.8 million, a marked improvement from the $158.6 million loss recorded the previous year.
Reddit sees potential in data licensing as a significant revenue stream, with plans to recognize approximately $66.4 million in such deals in 2024.
Recently, the platform expanded its partnership with Google, granting the search giant broader access to Reddit’s data for AI model training and other purposes.
Reddit disclosed that the Federal Trade Commission had queried the company regarding its data-licensing practices last week.
As part of its IPO, Reddit extended an opportunity for select moderators and users, known as Redditors, to purchase shares through a directed-share program. This approach, previously utilized by Airbnb, Doximity, and Rivian, serves as a gesture to reward influential users and customers.
