Reddit seeks to raise $748 million from an IPO

Reddit’s IPO prospectus stated that it expects the shares to be priced at between $31 and $34 per share upon offering, as the first social media company to go public in years.

Reddit, along with some existing shareholders, plans to offer 22 million shares of the company’s Class A stock, meaning the IPO could raise up to $748 million of those shares, according to an updated prospectus.

According to CNN, the company officially announced its initial public offering last month, and Reddit itself expects to earn approximately $450 million in IPO proceeds, if shares are priced at the midpoint of the expected range.

The company said it will use the funds for general purposes such as operating expenses, and possibly to license, acquire or invest in new technologies, assets or intellectual property.

Overall, Reddit is seeking a $6.4 billion valuation through the IPO, which is lower than the $10 billion valuation the company targeted when it announced its last funding round in 2021.

Some investors believe Reddit’s listing could serve as an indicator of the larger IPO market, which has been in the doldrums, with Wall Street hoping for a mega-listing that could revive deal-making, and that could signal the current desire among investors to buy shares in… An unprofitable company after the company said last month that it had not achieved profits in its nearly 19-year history.

Reddit had announced net losses of $90.8 million in 2023. However, the company said its sales were growing – revenues jumped 21 percent year over year in 2023 – and it aims to grow new business lines, including licensing data to artificial intelligence companies. To boost its bottom line.

The company also said it now has an average of more than 73 million daily active users, as of the last three months of 2023, up from the 52 million daily active users it reported in 2021.

The company is taking the unusual step of giving a portion of these users the opportunity to become shareholders by reserving 8 percent of the IPO shares, or 1.76 million shares, for the site’s most loyal users.

Users had until March 5 to pre-register to purchase shares in the list; Those who do so will have the opportunity to opt out of purchasing shares now that they have been priced.

The company acknowledged that “participation by site users in this offering may lead to increased volatility” in its stock price. Unlike institutional investors, who typically participate in initial public offerings and tend to hold on to their investments for longer periods of time, individual retail investors are more likely to sell quickly. Which may negatively affect the company’s share price once it goes public.