Redditthe social media platform that became extremely popular during the pandemic due to the meme stock phenomenon, prepares for the stock market landing on Wall Street. This would be the first IPO in the sector since Pinterest (2019), at a time when competition for advertising investments with giants such as TikTok and Facebook is becoming increasingly fierce. Here are all the rumors about Reddit’s IPO, one of the most anticipated this year.
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For Reddit, possible debut at the end of March
Reddit is reportedly talking to some potential investors interested in the company’s initial public offering. The operation should be made public at the end of February, and then launch the roadshow in March with a view to the stock market debut within the first quarteraccording to sources familiar with the matter.
The San Francisco-based company would aim to place around 10% of its shares. According to what we learn, one would emerge from the private negotiations concerning the unlisted shares of Reddit company valuation of just under $5 billionalthough this estimate could be revised upwards at the time of the IPO, thanks to greater liquidity.
In any case, the final amount will also depend on market conditions and it is not certain that the operation will be successful.
What Reddit does, which became popular for “meme stocks”
Founded in 2005 by web developer Steve Huffman and entrepreneur Alexis Ohanian, Reddit is a social news, entertainment and forum website where registered users can post content. It owes its popularity precisely to niche discussion groupswith the possibility of voting favorably or not on contents posted by other members.
The company hit the headlines during the pandemic period, when an online community of retail investors organized themselves to buy shares of troubled companies en masse, sending major hedge funds into a tailspin. The frenzy has transformed companies like GameStop, AMC Entertainment Holdings and Blackberry into so-called “meme stocks”causing large fluctuations in the stock market value of these securities.
It will therefore be curious, if the IPO goes through, to see whether the interest of small investors can also extend to the same users who in the past made agreements using Reddit.
The core business is advertising
The company generates revenue primarily through advertising and also offers premium access for $5.99 per month, but has yet to make a profit. In the past, Reddit has attributed losses to investments in the platform and its users’ lower engagement with advertising on its site compared to other social media sites.
It expects to make just over $800 million in ad revenue in 2023, up more than 20% compared to the previous year. Additionally, Reddit said last year that it would charge companies for access to its application programming interface (API), which is leveraged by tech companies to train large language models used in artificial intelligence .
For Reddit rating decreasing from 2021
Reddit has been preparing for an IPO since 2021, but hostile market conditions have contributed to slowing the process. As reported by Bloomberg, in the past there was talk of a valuation of around $10 billion for the company, with the possibility of rising up to $15 billion.
Instead the IPO market has slowed downtech giants have started laying off staff and new listings have been less successful than in the past. Instacart, whose value reached a peak of $39 billion in March 2021debuted in September 2023 at a valuation of $9.9 billion and it now stands at around $7.1 billion of market cap.
Now the conditions seem more favorable, thanks to the probable soft landing of the economy and the upcoming easing of monetary policy. Furthermore, i Social media giants have seen a rebound over the past year, driven primarily by a technology rally on the prospect of interest rates lowering after peaking. Meta Platforms (Facebook) shares have more than tripled in value since the start of 2023, while Snap has seen an 84% gain over the same period.