Reddit Files IPO: RDDT to Start Trading as Soon as March
Reddit Files IPO: RDDT to Start Trading as Soon as March
The IPO could bring in $5 billion to $15 billion.
- Reddit files preliminary prospectus for initial public offering.
- Stock could start trading as soon as March under ticker RDDT.
- Reddit to leverage artificial intelligence to bolster growth.
Reddit—the social media company sometimes referred to as the “front page of the internet”—filed its initial public offering (IPO) preliminary prospectus (Form S-1) with the Securities and Exchange Commission (SEC) on Thursday, Feb. 22.
While the move wasn’t a surprise—Reddit filled confidentially over two years ago with the SEC—the timing is a bit earlier than some expected. The move is also set to breathe some life into the IPO market, which has been subdued over the last year following a series of flops in 2023 from names like Arm Holdings (ARM) and Instacart (CART).
When will shares start to trade and what is the valuation?
The preliminary prospectus doesn’t list a valuation, but estimates range from $5 billion to $15 billion. Large players backing the listing include Fidelity Investments (FNF), Sequoia Capital (SEQUX) and Tencent Holdings (TCEHY), among others. Goldman Sachs (GS) and Morgan Stanley (MS) are the lead underwriters. A valuation should come in the form of a follow-up filing, likely in the next couple of weeks. Reddit will trade under the ticker RDDT.
In any case, Reddit’s IPO will test the waters for the market and, if successful, could introduce a new wave of IPOs through the rest of the year. All eyes will be on the IPO regardless of its valuation, and it’s likely to attract the attention of Wall Street Bets (WSB), a community hosted on Reddit.
There will be three classes of common stock, according to the prospectus. Class A shares, class B shares and class C shares, with the former two offering voting rights and the latter offering no voting rights.
Reddit is also considered an “emerging growth company” entitling it to reduced reporting requirements, such as only needing to provide two years of audited financial statements instead of the normal three.
Reddit to utilize artificial intelligence to launch growth
Reddit has plenty of opportunity for growth, according to analysts who have been watching the stock in anticipation of this IPO. The social media site has an impressive 100k+ active communities, 73 million average daily active users, and over 1 billion posts.
With that user base and the potential for more growth, Reddit is situated nicely to grow its advertising business, and it is planning to use artificial intelligence to streamline those efforts. Reddit recently announced an expansion to its partnership with Google, which will let Reddit use its data to train its AI.
Reddit is also moving into the data licensing business, allowing third-party companies to use the site's data, something that caused intense backlash from Reddit communities last year.
While the company is still generating losses, the growth potential should attract investors. According to the SEC filing, Reddit posted net losses of $158.6 million and $90.8 million for 2022 and 2023, respectively. As with other high-growth stocks though, that likely won’t dissuade investors, but only time will tell.
Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater
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