Reddit is getting ready to join the New York Stock Exchange, eyeing a $6.4 billion valuation. They’re listing themselves on the exchange as “RDDT,” offering 22 million shares at $31 to $34 each.
Joining the Stock Exchange
Redditt, one of the world’s largest and most popular social media sites, is looking to become a publicly traded company on the New York Stock Exchange.
The Benefits
For Reddit, becoming a publicly traded company would have many benefits, such as access to a wider range of funding from investors worldwide and an increase in its visibility and credibility.
Increasing Transparency
However, Redditt going on the New York Stock Exchange would also mean the company would be subject to higher levels of regulatory scrutiny and requirements for transparency since it must now publicly disclose financial, operational, and strategic information on a regular basis.
A Hefty Price
However, the bigger story behind Redditt’s new direction isn’t the fact they want to go public, but rather the price they are looking to be valued at.
Selling RDDT
Redditt and its investors are hoping to join the New York Stock Exchange with an evaluation of up to $6.4 billion under the ticker symbol “RDDT.”
22 Million Shares
In a recent Securities and Exchange Commission filing, Reddit revealed that it is looking to sell 22 million shares in its initial public offering (IPO), with a price range between $31 and $34 per share.
The Plan
If Reddit’s big reveal to the New York Stock Exchange goes as planned, it could raise as much as $748 million.
Where the Shares Go
Out of the 22 million shares they plan on listing, Reddit wants to sell about 15.3 million on the stock exchange directly, while the remaining shares will be offered to Reddit employees and investors.
A Noticeable Decrease
The $6.4 billion IPO would also mark a notable decrease in Reddit’s $10 billion valuation in a private funding round in August 2021, even though analysts at New Street Research suggested a base case valuation of $10.4 billion.
Reserved for Users
For Reddit users and moderators active on the platform before January 1st, approximately 1.76 million shares, or 8% of the total offering, are reserved.
Bypassing the Usual Lock Up
The shares reserved for users will be made available for purchase and immediate resale on the open market, allowing these participants to bypass the usual lock-up period.
Increasing Profits
For the fiscal year 2023, Reddit reported that its revenue totaled $804 million. This would mark a 20.6% increase from the previous year, with the increase being primarily driven by advertising.
Google and Reddit
The company also benefits from a content licensing agreement with Alphabet’s Google, which has been reported to be worth $60 million annually.
Winning While Losing
However, despite the revenue growth seen in 2023, Reddit experienced a net loss of $90.8 million in 2023, which is actually an improvement from the $158.6 million net loss in 2022.
Significant Shareholders
Tencent, Advance Magazine Publishers (the parent company of Condé Nast), and Sam Altman, the CEO of OpenAI, who served on Reddit’s board from 2015 to 2022, are the most significant shareholders looking to profit from and influence this decision.
Creating Communities
As a social media network, Reddit is best known for its user-generated content and forums, which cover a broad range of topics to create a community around the subject and distinguish Reddit from other social media platforms.
Gamestop Stock
This community aspect has enabled users to organize massive groups to mobilize for various causes, such as the GameStop stock trading event in 2021, during which the price was driven up to challenge hedge funds that attempted to short it.
Worried Users
Despite the company’s eagerness for this change, Reddit users are concerned about the potential shift in focus from user satisfaction to maximizing shareholder profits following the IPO.
Experts Watching
Experts are closely watching the outcome of Reddit’s IPO and its subsequent performance to view them as indicators of the health of the IPO market.
This seems to be the result of other technology and consumer brand IPOs in recent periods underperforming.
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The content of this article is for informational purposes only and does not constitute or replace professional financial advice.
