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Reddit to Go Public: IPO Priced at $34, Valuing Company at $6.5 Billion Amid Tech Sector Adjustments

Reddit, a platform that hosts myriad online communities and is 19 years old, set its initial public offering (IPO) price at $34 per share on Wednesday, hitting the upper end of its anticipated range.


This pricing effort generated $519 million, as stated in a company press release, and positioned Reddit's market value at approximately $6.5 billion. The company initially aimed for a share price between $31 and $34.


The public trading of Reddit shares is set to commence on Thursday under the symbol “RDDT,” marking the first significant public listing of a social media company since Pinterest in 2019. It's also among the rare venture-backed technology offerings in the last couple of years. The IPO involved the sale of 15.28 million shares by Reddit and an additional 6.72 million shares by its existing shareholders.


The valuation at the time of the IPO reflects a decrease from the $10 billion valuation in 2021 during the height of the technology sector boom. The decline comes in the wake of increased inflation and higher interest rates in 2022, leading investors to move away from high-risk assets. This shift forced many startups to reduce their operations, cut their valuations, and prioritize profitability over expansion.


On the day preceding Reddit’s IPO, Astera Labs, a company specializing in data center hardware, went public and saw its stock price surge by 72%, highlighting the growing investor interest in artificial intelligence ventures. Nevertheless, the IPO landscape has been notably quiet for over two years, with only a handful of technology firms like Instacart, Klaviyo, and Arm Holdings managing to go public during this period.


Reddit, whose main revenue source is online advertising, faces stiff competition from industry behemoths such as Alphabet and Meta, along with other platforms like Snap, X (formerly Twitter), Pinterest, Discord, Wikipedia, and Amazon's Twitch.


The company reported a 20% increase in revenue in the last year, reaching $804 million, up from $666.7 million in 2022. Its net loss in 2023 improved to $90.8 million from a net loss of $158.6 million the year before.


Reddit has indicated in its filings that it sees significant potential in data licensing as a revenue stream and expects to recognize approximately $66.4 million from such agreements in 2024. The company has recently expanded its partnership with Google, granting the tech giant enhanced access to Reddit’s data for AI model training and other projects.


Last week, Reddit disclosed that it had received an inquiry from the Federal Trade Commission concerning its practices around data licensing.


In an innovative move with its IPO, Reddit offered key moderators and active users—the "Redditors"—the opportunity to purchase shares through a directed-share program, a strategy previously employed by companies like Airbnb, Doximity, and Rivian to honor their significant contributors and customers.

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