Reddit debuts on Wall Street after a successful IPO

The 'social of do-it-yourself traders', Reddit, enters a new era as a publicly traded company with a market value of $6.4 billion after the platform's initial public offering (IPO), the largest in years by a social media company, was valued at $34 per share. The price, announced on the evening of 20 March, was at the top of the target range set by Reddit's investment bankers. This sets the stage for Reddit's shares to begin trading on Wall Street today, 21 March, under the symbol Rddt. The company's latest valuation of $6.4 billion is down from 2021, when it was valued at $10 billion during a private financing round. But Reddit's IPO received four to five times as many oversubscriptions before its debut, a positive sign that it will reach its desired valuation. Its largest shareholder is Advance Publications, the parent company of Condé Nast, which owns popular magazines such as the New Yorker, Vogue and Wired.

Reddit is a social news, entertainment and forum website where registered users (called redditors) can publish content in the form of textual posts or hyperlinks. In addition, users can give an 'upvote' or 'downvote' rating to the published content: these ratings then determine the position and visibility of the various contents on the site's pages. The site's content is organised into areas of interest called subreddits. The interest surrounding Reddit derives largely from a large audience that religiously visits the service to discuss a potpourri of topics ranging from silly memes to existential concerns, as well as on topics related to economics and do-it-yourself finance and to get advice from like-minded people. However, by technology industry standards, Reddit remains extraordinarily small for a company that has existed since 2005.

Meta Platforms - whose main social media service, Facebook, was launched only 18 months before Reddit - boasts a market value of over $1.2 trillion. Meta also generates annual revenues of $135 billion, while Reddit remains under $1 billion. Another problem: Reddit has never profited from its broad reach, while it has accumulated cumulative losses of $717 million. This number has grown from cumulative losses of $467 million in December 2021, when the company first filed papers to list itself on the stock exchange, before abandoning the attempt.

In documents filed for its new IPO, Reddit attributed the losses to a recent focus on finding new ways to increase revenue. But now Reddit will have more money in the bank to finance its ambitions to expand its influence and raise more revenue in the process. The IPO raised about $519 million for the San Francisco-based company, but it will not receive it all because it still has to pay commissions and other costs associated with the offering. The bankers still have a 30-day window to sell another 3.3 million shares that would raise another $112 million before commissions and expenses are deducted. Reddit has reserved up to 1.76 million of the 15.3 million shares offered in the IPO for users of its platform. As usual, the remaining shares were purchased mainly by mutual funds and other institutional investors, who believe Reddit is ready for prime time in finance.