Will Wall Street Bet Big on a Reddit IPO?
Will Wall Street Bet Big on a Reddit IPO?
What we know about a possible $15 billion March public offering
- Long-awaited news of a possible Reddit IPO is sparking excitement among traders.
- The company is reportedly seeking a valuation upward of $15 billion.
- Traders are still gathering intel, but the IPO could come as soon as March.
What is Reddit and what does it do?
Reddit, founded in 2005 by Steve Huffman and Alexis Ohanian, is a sprawling social media hub where users share, debate, discuss and explore specific interests and topics. The activity forums known as subreddits offer discussions centered on news, politics, pop culture, social causes and niche communities. Subjects range from gardening to searching for extraterrestrial life.
The platform was host to the meme stock mania that roiled markets after trading firms started to offer commission-free trading. The subreddit r/wallstreetbets, or WSB, fueled historic rallies in stocks like GameStop (GME) and AMC Entertainment Holdings (AMC). The book-based film Dumb Money, released last year, tells the story of the epic meme stock rally.
When will Reddit go public?
Reuters reported last year that Reddit was eyeing an initial public offering (IPO) seriously by seeking investment bankers to provide advice for the launch.
The company is reportedly aiming for an IPO in March, although a valuation hasn’t been decided yet. However, Reuters quotes sources as saying Reddit wants to sell about 10% of its shares in the launch. If it happens, it will mark the first IPO of a large social media brand since 2019, when Pinterest (PINS) debuted on the market.
What valuation will Reddit earn?
In 2021, a private round of fundraising valued the social media giant at $10 billion, and one source said it hoped to reach a $15 billion valuation for its IPO. The IPO should test how willing its largest investors are to list shares. Its biggest backers include Fidelity Investments (FNF), Sequoia Capital (SEQUX) and Tencent Holdings (TCEHY).
In any case, appetite is there as advertising competition ramps up amid social media companies. Reddit’s advertising revenue has increased dramatically over the past several years but still lags behind competitors, such as Meta Platforms (META).
Still, the site boasts over 70 million daily active users. Reddit has taken steps to further monetize the platform, including a move to charge for the application programming interface (API) that generated widespread pushback from Reddit communities.
For now, markets must wait for further news, but if the company is indeed targeting a March IPO, we should hear more in the coming weeks.
Trade Reddit shares the moment it lists with zero commissions here.
Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater
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