UPDATED: Investors rallied around Reddit‘s initial public offering Thursday, driving up the discussion-forum company’s stock price as much as 70% in its market debut. Through the IPO — expected to be among the biggest tech stock offerings of the year — Reddit raised $519 million and created a windfall for existing shareholders, including Condé Nast parent company Advance Publications and OpenAI CEO Sam Altman.
Reddit shares began trading on the New York Stock Exchange at about 1:15 p.m. ET on Thursday (March 21) under the ticker symbol “RDDT.” The initial offering price was $34 per share, valuing Reddit at $6.4 billion (less than its prior $10 billion private valuation). Shares opened at $47 and climbed as high as $57.80 apiece, before settling down to about $50 (+47%) as of 1:50 p.m. ET.
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 as well as potentially to “in-license, acquire or invest in complementary technologies, assets or intellectual property.”
On Thursday, Reddit announced the pricing of its IPO at $34 per share — the high end of its previous range. A total of 22 million shares of Class A common stock were sold in the offering (15.28 million by Reddit and 6.72 million by other shareholders). In addition, Reddit has granted underwriters a 30-day option to purchase up to an additional 3.3 million shares of stock at the IPO price.
“We built Reddit with the belief that communities unlock the power of human creativity and create a sense of belonging and empowerment for their members,” the company says in its prospectus. “Our over 100,000 active communities” — known as subreddits — “have channeled the power of human creativity to grow Reddit since our founding.”
Advance Publications owns 42.2 million shares of Reddit, worth more than $2.3 billion after the IPO. Condé Nast had acquired Reddit for $10 million in 2006 before spinning it out in 2011. OpenAI’s Altman, who owns 11.37 million Reddit shares, has a stake currently worth more than $600 million.
Reddit said “substantially all” pre-IPO shares and convertible securities owned by Advance, Altman and other insiders are subject to a 180-day lockup period during which they are not allowed to sell their shares. Reddit CEO Steve Huffman earned $17 million in the IPO through the sale of 500,000 shares; the remaining 4.17 million shares he directly owns are subject to the lockup restriction.
In a novel arrangement, Reddit’s underwriters reserved a portion of shares for moderators and other power users on the discussion platform. Up to 1.76 million shares of stock (8% of the shares in the IPO) were available at the $34/share price through a directed share program to “eligible users and moderators on our platform” as well as certain board members and “friends and family members of certain of our employees and directors.” Those aren’t subject to the lockup restrictions.
For 2023, Reddit reported revenue of $804.0 million, up 21% year over year, and a net loss of $90.8 million compared with a $158.6 million loss the year prior.In December 2023, Reddit had more than 500 million visitors and in the fourth quarter had an average of 73.1million daily active unique users worldwide. The company had 2,013 full-time employees as of the end of 2023.
In addition to ad revenue, Reddit is monetizing the posts on its platform through AI data-licensing deals inked in January 2024, which it disclosed will total $203million with terms ranging from 2-3 years. Last month Reddit and Google announced a pact allowing the internet giant to use Reddit data to train its AI models, which is worth about $60 million annually, Reutersreported.
The lead underwriters for Reddit’s IPO are Morgan Stanley, Goldman Sachs, JPMorgan Chase and Bank of America.
On Wednesday, AI semiconductor company Astera Labs launched its IPO, with shares soaring 72% in its debut. The stock was up over 20% Thursday, pushing its market cap to over $11 billion.
