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Reddit is aiming to raise more than $500mn in an imminent initial public offering that could value the social media company at as much as $6.4bn and set the tone for private start-ups weighing plans to list in 2024.
Reddit will kick off its roadshow on Monday, seeking to persuade investors to participate in a New York Stock Exchange listing which other private companies hope will revive the IPO market after a moribund two years.
The company plans to sell 15.3mn shares at $31-$34 apiece, in a process being run by Morgan Stanley, Goldman Sachs, JPMorgan and Bank of America, according to a public filing.
That would give the lossmaking company a market capitalisation of $5.8bn-$6.4bn — well below the $10bn Reddit reached in its last private valuation in 2021.
If the listing goes ahead as planned, Reddit could raise as much as $519mn.
Existing shareholders in the company will sell a further 6.7mn shares as part of the process. Reddit has earmarked almost 2mn shares to be bought by users and moderators who joined the platform prior to January 1.
The social media company’s public offering comes as the US IPO market has been depressed for more than two years. Even groups that have managed to go public recently have had to offer investors significant valuation discounts compared with listed rivals.
Reddit’s listing is seen as a potential litmus test of how aggressive or cautious banks will be in a jittery IPO market, and what balance of institutional and retail investors it attracts.
Despite US equity markets reaching an all-time-high, investors remain extremely price sensitive when it comes to the IPO market, according to people familiar with the deal. Some investors are valuing the company at $5bn-$5.5bn, while others are using Snapchat on the low end and Pinterest on the high end to calculate Reddit’s valuation.
Reddit has built a significant advertising business, which was the main contributor to its $800mn in sales last year, but has never made an annual profit. The company recorded a $91mn loss in 2023.
There is also concern that the deal could get “memed”, a few investors said ahead of the roadshow. This is a reference to the Reddit retail traders who became notorious for buying up shares of AMC and GameStop.
These traders are preparing to bet against the company, a person familiar with the deal said. Reddit warned in its prospectus that trading in its shares could be particularly volatile.
Reddit was founded in 2005 and acquired by Condé Nast a year later. The company was spun out as an independent subsidiary by Advance Publications, Condé Nast’s parent, in 2011.
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