renew: Reddit’s IPO captivated investors on Thursday, with the discussion forum company’s shares jumping 48% in its debut. With the IPO, expected to be one of the largest tech stock offerings of the year, Reddit raised $519 million and delivered a windfall to existing shareholders, including Condé Nast parent Advance Publications and OpenAI CEO Sam Altman.
Reddit stock began trading on the New York Stock Exchange at approximately 1:15 pm on Thursday (March 21) under the ticker symbol “RDDT.” The initial offering price was $34 per share, valuing Reddit at $6.4 billion (down from its previous private placement valuation of $10 billion). The stock opened at $47 before climbing to $57.80 per share (up 70%) and closed at $50.44 during regular trading, giving it a market capitalization of approximately $9.5 billion.
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Reddit, the 19-year-old company once billed as “the front page of the Internet,” said it plans to use the net proceeds from the IPO for general corporate purposes and may “license, acquire or invest in complementary technologies, assets or intellectual property.”
On Wednesday, Reddit announced it was pricing its IPO at $34 per share, the upper end of its previous pricing range. A total of 22 million shares of Class A common stock were sold in the offering (15.28 million shares were sold by Reddit and 6.72 million shares were sold by other shareholders). Additionally, Reddit has granted underwriters a 30-day option to purchase up to an additional 3.3 million shares at the IPO price.
“We created Reddit on the belief that communities can unleash the power of human creativity and create a sense of belonging and empowerment for their members,” the company said in its prospectus. “Our more than 100,000 active communities” (i.e., Reddit subs) subreddit) “Reddit has been harnessing the power of human creativity to grow since its inception.”
Advance Publications owns 42.2 million Reddit shares, worth more than $2.1 billion after the IPO. Condé Nast bought Reddit in 2006 for $10 million and spun it off in 2011. OpenAI’s Altman owns or controls approximately 12.16 million Reddit shares, with his stake currently valued at $613 million.
Reddit said “substantially all” pre-IPO stock and convertible securities owned by Advance, Altman and other insiders were subject to a 180-day lockup period during which they were not allowed to sell their shares. Reddit CEO Steve Huffman made $17 million from the sale of 500,000 shares in the IPO; the remaining 4.17 million shares he held directly were locked up.
In a novel arrangement, Reddit’s underwriters reserve a stake for moderators and other power users on the discussion platform. Through the directed share program, up to 1.76 million shares (8% of the IPO shares) were sold at $34 per share to “qualified users and administrators on our platform” as well as certain board members and “friends and friends.” Family members of certain of our employees and directors. ” These are not subject to lockdown restrictions.
In 2023, Reddit reported revenue of $804.0 million, a year-over-year increase of 21%, and a net loss of $90.8 million, compared with a loss of $158.6 million the previous year. In December 2023, Reddit had more than 500 million visits, and the global average number of daily active unique users in the fourth quarter was 73.1 million. As of the end of 2023, the company had 2,013 full-time employees.
In addition to advertising revenue, Reddit is also monetizing posts on its platform through an artificial intelligence data licensing deal signed in January 2024, which was revealed to total $203 million and have a term of 2-3 years. According to Reuters, last month Reddit and Google announced an agreement that would allow the internet giant to use Reddit data to train its artificial intelligence models, an agreement worth about $60 million per year.
The lead underwriters for the Reddit IPO are Morgan Stanley, Goldman Sachs, JPMorgan Chase and Bank of America.
To celebrate Reddit’s IPO, the company shared a video of a “day in the life” of its mascot Snoo as he prepares to head to the New York Stock Exchange and ring the bell:
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