(Bloomberg) — Reddit Inc. and its investors are aiming to raise as much as $748 million in the biggest initial public offering so far this year, according to people familiar with the matter.
The social media platform and some of its current shareholders plan to sell 22 million shares for between $31 and $34 a share, the people said, asking not to be identified because the information has not yet been made public. That's what it means. The company was seeking a valuation of up to $6.5 billion to go public, Bloomberg News reported.
The company has set aside about 1.76 million shares in the IPO for purchase by users and moderators who created accounts before January 1, the people said. These shares are not subject to a lock-up period, so owners can sell them on the same day. According to documents Reddit filed with the U.S. Securities and Exchange Commission in February.
A representative for Reddit declined to comment.
Reddit rating
Reddit's more than two-year path to going public reflects the ups and downs of the market, starting with its first confidential filing in 2021, when IPOs on U.S. exchanges hit an all-time high, according to data compiled by Bloomberg. The total amount was reported to be $339 billion. That same year, Reddit raised funds valuing the company at $10 billion, and the following year, Bloomberg News reported that an IPO could value the company at up to $15 billion.
Meanwhile, U.S. IPOs have declined, reaching just $26 billion last year, according to data. In January, Bloomberg News reported that Reddit was considering feedback from early meetings with potential IPO investors that it should consider a valuation of at least $5 billion.
The company is a notable addition to this year's roster of new and soon-to-be-public companies. The largest of these listings was Amer Sports' $1.57 billion offering in January. Astera Labs Inc., an artificial intelligence-focused software maker, said in a filing Friday that it will seek up to $534 million in an IPO, which could be a follow-up to Reddit. expensive.
Read more: Intel-backed Astera aims for $534 million in IPO with AI appeal
Reddit's listing will be closely watched by IPO candidates such as Microsoft-backed data security startup Rubrik and healthcare payments company Waystar Technologies. Their deliberations come after the listing of four companies in the United States, led by semiconductor design company Arm Holdings Inc.'s $5.23. A 1 billion share offering in September failed to trigger a lasting recovery in the market.
Loss reduction
Reddit, which was founded in 2005, averaged 73.1 million daily active unique visitors in the fourth quarter, according to a February report. The company reported a net loss of $91 million on revenue of $804 million in 2023, compared to a net loss of approximately $159 million on revenue of $667 million in the same period last year. there were.
Reddit's largest shareholder is Advance Magazine Publishers Inc., part of the publishing empire of the Newhouse family that owns Condé Nast, which acquired Reddit in 2006 and spun it off into its own in 2011.
Reddit said its millions of loyal users and moderators pose both benefits and risks for the company. Redditors have historically had a belligerent relationship with the site, revolting over everything from racism on the platform to executive staffing decisions.
meme stocks
Thousands of members of the WallStreetBets forum, which boasts about 15 million users and helped popularize meme stocks like GameStop Corp., voted to beef up the forum's posts about short selling at the start of trading on Reddit. . The reasons ranged from the company's lack of profitability to competitive concerns.
Read more: The success of Reddit's IPO hinges on the company's unruly user base
The IPO is led by Morgan Stanley, Goldman Sachs Group Inc., JPMorgan Chase & Co., and Bank of America, according to a Reddit filing. The company plans to trade its shares on the New York Stock Exchange under the symbol RDDT.
Reddit co-founder and CEO Stephen Huffman said in a signed letter included in the filing that the company has many opportunities to grow both its platform and business. Stated.
“Advertising is our first business, and advertisers of all sizes are finding Reddit to be a great place to find engaged customers they can't reach anywhere else,” Huffman said. “Advertising on Reddit is rapidly evolving, but we're still in the early stages of growing this business.”
AI license
Reddit said it is in the early stages of allowing third parties to license access to data on the platform, including for training artificial intelligence models. The company announced in January that it had signed a data license agreement with a total value of $203 million and a term of two to three years. The company expects to generate at least $66.4 million in revenue from these contracts this year, according to filings.
Reddit also announced a deal with Alphabet Inc.'s Google that will allow Google's AI products to use Reddit's data to improve their technology. Improving large-scale language models often requires vast amounts of human-generated content.
Mr. Huffman owns the stock, giving him 3.5% voting power. This indicates that Class A shares sold in an IPO will have one voting power, while Class B shares will have 10 voting rights. Mr. Huffman also has a voting representation agreement with Advance.
Other major shareholders include Chief Operating Officer Jennifer Wong, as well as FMR LLC, an affiliate of OpenAI CEO Sam Altman, Tencent Holdings, Vy Capital, Quiet Capital, according to the filing. This includes companies such as Tacit Capital.
Huffman's co-founder, venture capitalist Alexis Ohanian, is not listed as an investor with more than a 5% stake and is not named elsewhere in the filing. do not have.
–With assistance from Priya Anand, Ryan Gould, and Katie Roof.
(Updates with Reddit answer in 4th paragraph)
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