The social network Reddit seeks to raise up to $748 million this Thursday in its IPO. The company, almost 20 years old, thus establishes its valuation at around $6.4 billion. The company will sell approximately 22 million shares in its initial public offering at a price of between $31 and $34 each under the acronym “RDDT”, according to the latest version of the IPO prospectus it filed with the Securities and Exchange Commission (SEC). , in its acronym in English).
The platform reserved 8% of its bid for certain Reddit users who have performed a significant number of “moderator actions” or have high “karma” boosts, a measure of the community’s engagement with their posts. as well as for some members of the company and their friends and family. Reddit has 60,000 daily active moderators who organize text forums divided by different topics of interest, called “subreddits”, on topics of all kinds and 73 million daily users. However, the company posted a net loss of $90.8 million last year, an improvement over 2022, when it lost $158.6 million.
Reddit hopes to give more advertisers access to its daily active users, some of whom delve into the forum for product recommendations. The platform’s biggest competitors are Google, Facebook, Wikipedia, Snap, X, Pinterest, Roblox, Discord and Amazon. Unlike other social networks, most Reddit users do not use their name or photo, but rather avatars and pseudonyms. They also do not usually share personal information, which makes advertising on the forums less attractive for advertisers.
Reddit has historically had a lax attitude toward content moderation, which has caused hateful and pornographic content to fluctuate across forums, another negative for advertisers. Reddit also recently signed a data licensing agreement with Google, valued by specialist media at around $60 million a year, to help train the tech giant’s artificial intelligence models on forum conversations. Last year, Reddit also began charging third-party developers for access to its API, a tool that allows the social network to share information with other software.
It can become an “action meme”
One of the most popular subreddit on the platform is r/wallstreetbets, a forum that helped fuel the rise of what are known as “meme stocks” in 2021 such as GameStop – which went from being worth $5 to $500 in one month – and AMC , among other. “I think Reddit stock has the right ingredients to be a meme stock,” Jonathan Brogaard, a finance professor at the University of Utah who has studied meme stocks, told Vox.
Brogaard noted that Reddit has the attention of many retail investors and its price will likely be volatile due to the fact that it is a new listing. “These seem to be the two ingredients necessary for a stock to become a meme stock,” she added. However, conversations among r/wallstreetbets participants indicate otherwise, as it is difficult to come across positive comments about the company’s IPO. Match, the parent company of Tinder; in 2017, Snap (formerly Snapchat); and in 2019, Pinterest.
