Reddit sets to make public debut tomorrow at $$6.4B valuation as Reddit power users decline IPO offer

Tomorrow marks a significant milestone for Reddit as it gears up for its much-awaited debut on the New York Stock Exchange, set for Thursday, March 21, with a valuation of $6.4 billion. The impending listing is poised to capture the attention of investors, serving as a litmus test for the IPO market’s resilience amidst promising signs of recovery.

Reuters reported a few hours ago that Reddit, along with its bankers, is considering pricing its initial public offering (IPO) at the upper end of the projected range or even higher, signaling strong investor interest. With the IPO reportedly oversubscribed between four to five times, Reddit appears primed to hit its targeted valuation, Reuters reported.

Amidst the buzz surrounding Reddit’s impending IPO, power users of the platform are expressing skepticism about participating in the Wall Street debut. According to reports from CNBC, Reddit moderators have voiced their reluctance to engage in the IPO, citing ongoing tensions with management and apprehensions regarding the company’s strategic direction.

Sarah Gilbert, a moderator of the popular r/AskHistorians subreddit, shared her concerns with CNBC, saying, “It doesn’t really feel like Reddit is necessarily giving back, so much as it feels like maybe it’s asking for even more.” This sentiment underscores a broader sentiment among moderators and active users who feel a sense of disconnect between Reddit’s leadership and its community.

The journey to becoming a publicly traded entity has been a long time in the making for Reddit, spanning over two years. Initially filing for its IPO confidentially in December 2021, the company faced delays attributed to market turbulence triggered by the Federal Reserve’s tightening measures.

An intriguing aspect of Reddit’s IPO is its potential windfall for OpenAI CEO, Sam Altman, a significant shareholder with stakes in both Class A and Class B shares, granting him substantial voting power. Altman’s association with Reddit dates back to his tenure at Y Combinator, where he invested in the platform. His current role at OpenAI, known for the revolutionary ChatGPT, adds a layer of tech industry intrigue to Reddit’s narrative.

While Reddit’s previous funding rounds in 2021 valued the platform at $10 billion, the precise valuation sought in the upcoming share sale remains undisclosed. However, it’s anticipated that Reddit will offer nearly 10% of its shares during the IPO, potentially marking a significant milestone for the company’s growth trajectory.

Financially, Reddit’s journey reflects a mix of challenges and promise. Despite reporting a net loss of $158.6 million in 2022, followed by improvements in 2023 with a reduced loss of $90.8 million, profitability remains a focal point. The company’s revenue surge in the final quarter of 2023, reaching $249.8 million with a net profit of $18.5 million, underscores its revenue potential amidst ongoing financial hurdles.

Reddit’s evolution has been fueled by substantial private funding, including notable rounds such as the $410 million Series F in 2021. These investments have propelled Reddit’s valuation to its current standing, reflecting the platform’s significant market presence and growth trajectory.

Founded in 2005 by Alexis Ohanian, Reddit has transformed into a social news aggregation powerhouse, attracting billions in monthly traffic. As it prepares for its IPO, Reddit’s journey exemplifies the resilience and dynamism of tech startups in the ever-evolving landscape of digital innovation.