Reddit is aiming for a massive $6.4 billion valuation, looks to raise at least $500 million

Reddit is gearing up for a significant initial public offering (IPO) with aims to raise over $500 million, potentially valuing the social media giant at an impressive $6.4 billion. This move could have far-reaching implications for other private startups considering going public in 2024.

The company is set to commence its roadshow on Monday, where it will seek to entice investors to participate in a listing on the New York Stock Exchange, a move hoped to breathe new life into the IPO market following a sluggish period of two years.

Reddit plans to offer 15.3 million shares at a price range of $31 to $34 each, with prominent financial institutions including Morgan Stanley, Goldman Sachs, JPMorgan, and Bank of America overseeing the process.

On a fully diluted basis, Reddit’s valuation is expected to range from $5.8 billion to $6.4 billion, a notable decrease from its $10 billion valuation in its last private funding round in 2021. If the listing proceeds as planned, Reddit could potentially raise as much as $519 million.

Additionally, existing shareholders will sell a further 6.7 million shares, while nearly 2 million shares have been reserved for purchase by users and moderators who joined the platform before January 1.

The decision to go public comes amid a sluggish US IPO market, with even recent listings facing challenges in attracting investors. Reddit’s IPO is anticipated to serve as a litmus test, gauging the appetite of both institutional and retail investors in a market characterized by extreme price sensitivity.

Despite the company’s substantial advertising revenue, which contributed significantly to its $800 million in sales last year, Reddit has yet to turn an annual profit, reporting a loss of $91 million in 2023.

Additionally, there are concerns that the IPO could attract speculative trading behaviour, reminiscent of the retail trading frenzy surrounding stocks like AMC and GameStop.

Founded in 2005 and acquired by Condé Nast in 2006, Reddit was spun out as an independent subsidiary by Advance Publications in 2011. With its IPO on the horizon, Reddit is poised to make a significant mark on the public markets.

(With inputs from agencies)