Reddit, the popular social network, is poised to make its trading debut on Thursday. According to AFP news, the company’s initial public offering (IPO) was priced robustly, suggesting significant enthusiasm from investors. Scheduled to trade on the New York Stock Exchange under the ticker symbol RDDT, Reddit disclosed in a statement on Wednesday that its IPO was priced at $34 per share. This pricing values the platform at approximately $6.4 billion.
The arrival of Reddit on the trading floor coincides with a slowdown in IPO activity within the tech sector, attributed in part to interest rate hikes by the US Federal Reserve. With financing becoming less accessible, Silicon Valley has experienced a shortage of companies ready to embark on the public listing journey, with Pinterest being the last major social media firm to do so back in 2019.
Based in San Francisco, Reddit initially filed for its IPO in 2021 during a period of heightened market activity fueled by pandemic-induced growth in the tech sector. However, momentum waned as the broader internet economy cooled.
Distinguished from platforms like Facebook or Twitter (now X), Reddit operates through approximately 100,000 specialized chatrooms known as subreddits. This structure fosters a more tailored user experience and reduces the likelihood of posts going viral.
Despite its niche approach, Reddit boasts an impressive user base, with 73 million average daily users and 267 million monthly users, primarily in the United States, according to regulatory filings.
Moderation within subreddits is largely decentralised, with the platform maintaining basic standards that users must adhere to. This decentralisation sets Reddit apart from more tightly controlled social media platforms like Facebook or TikTok.
In its IPO filing earlier this month, Reddit indicated plans to issue 15.2 million shares priced between $31 and $34. Additionally, following the example of companies such as Airbnb and Rivian, Reddit reserved approximately eight percent of its IPO shares for moderators and top users, colloquially known as “Redditors.”
Questions linger regarding Reddit’s potential for profitability, as the company has yet to generate a profit in its two-decade history. Reliant primarily on advertising revenue, Reddit faces challenges in monetising its platform effectively.
Founded in 2005, Reddit was swiftly acquired by Conde Nast, the publisher of esteemed magazines such as Vogue and The New Yorker. Following a spin-off in 2011, Conde Nast’s parent company, controlled by the Newhouse family, remains Reddit’s largest shareholder.
Among Reddit’s prominent investors is Sam Altman, CEO of OpenAI, who spearheaded a significant fundraising round approximately a decade ago.