Reddit prices IPO at $34 per share, set to raise $748 million

Reddit’s IPO: Social media major Reddit has successfully priced its initial public offering (IPO) at the upper end of its projected range, opening at $34 per share on Wednesday. This has boosted the struggling technology IPO market, raising $748 million and granting Reddit a valuation of approximately $6.4 billion.

To engage retail investors, Reddit allocated 8 per cent of its shares to eligible users, moderators, certain board members, and associates of its staff. Excluding shares sold by existing stakeholders, Reddit amassed gross proceeds of $519.4 million from its IPO. Earlier reports indicated Reddit's inclination to set the IPO price at or above the top end of the range, a decision that has been validated by the market response.

The pricing marks a departure from Reddit's earlier valuation of $10 billion during a private fundraising round in 2021. The successful IPO, alongside that of Astera Labs, holds promise for revitalising the tech IPO scene after a prolonged period of subdued activity.

Despite Reddit's enduring user loyalty, the platform has consistently operated at a loss since its inception in 2005, trailing behind commercial successes like Meta Platforms' Facebook and Twitter, now known as X. The platform's niche-focused user base and relaxed content moderation have posed challenges for attracting advertisers.

To diversify revenue streams, Reddit announced a $66 million contract in February to supply artificial intelligence training data to Alphabet's Google. However, recent scrutiny from the US Federal Trade Commission regarding Reddit's handling of user-generated content for AI training purposes has surfaced.

Reddit heavily relies on volunteer moderators from its user community to regulate content. However, tensions arose in 2023 when several moderators resigned in protest against Reddit's decision to charge third-party app developers for data access.

With over 100,000 online forums, known as "subreddits," catering to a wide spectrum of topics, Reddit's influence is undeniable. Notably, the platform gained widespread attention during the 2021 "meme-stock" saga, where retail investors coordinated on the "wallstreetbets" subreddit to influence stock prices, notably with GameStop.

According to regulatory filings, Reddit averaged 73.1 million daily active users in the final quarter of 2023. Its shares are set to debut on the New York Stock Exchange under the ticker symbol 'RDDT', with Morgan Stanley, Goldman Sachs, JPMorgan Chase, and Bank of America serving as lead underwriters for the offering. Morgan Stanley also secured the lead role in Astera's IPO.

(With Reuters inputs)