Reddit seeks to raise $748 million in upcoming IPO, targets up to $6.4 billion valuation

Reddit Inc. and its investors are gearing up to raise as much as $748 million in its long-awaited initial public offering (IPO) in what would be one of the biggest IPOs so far this year, Bloomberg reported on Sunday.

The popular social media platform, along with some of its current shareholders, is contemplating selling 22 million shares priced between $31 and $34 each, Bloomberg reported, citing people familiar with the matter, who requested anonymity as the details had not been made public yet. Bloomberg News previously reported that the company is eyeing a valuation of up to $6.5 billion in its IPO listing.

The move marks one of the significant IPOs of the year, underscoring Reddit’s ambitions to capitalize on its growing user base and market potential.

According to another report from Reuters, Reddit also disclosed it plans to seek a valuation of approximately $6.4 billion in its upcoming IPO. The anticipated valuation, when considering fully diluted shares, falls short of the $10 billion mark Reddit achieved after a fundraising round in 2021.

Late last month, Reddit officially filed for its long-anticipated IPO, submitting its S-1 filing to the Securities and Exchange Commission (SEC) following years of anticipation. The company intends to trade on the New York Stock Exchange under the ticker symbol RDDT.

The planned IPO will also mark the first significant tech IPO of the year and the first social media IPO since Pinterest went public in 2019, Reddit reported $804 million in annual sales for 2023, representing a 20% increase from the previous year. Its primary revenue stream stems from online advertising sales through its website and mobile app. Notably, Reddit moderators will have the opportunity to participate in the IPO through the company’s directed share program.

This IPO filing arrives nearly two decades after Reddit’s inception and signifies a pivotal moment for the platform, which still trails behind its social media counterparts in terms of commercial success, notably Facebook and Twitter.

In conjunction with the filing, Reddit disclosed that its net loss narrowed to $90.8 million in 2023, with revenue growth hovering around 21%, Reuters reported.

In 2022, Reddit reported a net loss of $158.6 million and an adjusted EBITDA of negative $108.4 million. By 2023, these figures showed improvement, with a net loss of $90.8 million and a negative adjusted EBITDA of $69.3 million. Although the company’s free cash flow also saw improvement, moving from –$100.3 million to –$84.8 million during the same period, challenges regarding profitability persist.

While Reddit did achieve a notable milestone in the final quarter of 2023, posting a revenue peak of $249.8 million along with a net profit of $18.5 million, the company’s free cash flow remained negative at –$22 million for the quarter, underscoring ongoing financial challenges.

Throughout its journey, Reddit has raised over $1 billion in private funding, including a significant $410 million Series F round in 2021 and a smaller $368 million Series E round earlier that year. These funding rounds propelled Reddit’s valuation to $6.4 billion with the Series E and approximately $10 billion with the Series F, marking significant milestones in its growth trajectory.

Reddit has been growing exponentially since its inception about two decades ago. Reddit has 7.57 billion in monthly traffic. The social news aggregation site has grown to become the ninth-most-visited website in the world and the third-most-visited website in the U.S., according to data from SemRush.

Founded in 2005 by Alexis Ohanian, Reddit is a social news aggregation, web content rating, and discussion platform. As of October 2020, Reddit ranks as the 17th-most-visited website in the world and the 7th most-visited website in the US, according to Alexa Internet.