Reddit’s IPO Draws Huge Demand, Sources Indicate Potential Fivefold Oversubscription
Reddit’s initial public offering (IPO) is currently experiencing significant oversubscription, with demand between four and five times higher than the available shares, according to sources familiar with the matter. This strong interest suggests that Reddit may achieve its desired $6.5 billion valuation. Although oversubscription doesn’t guarantee a successful stock market debut, it indicates a likelihood of reaching the targeted price range of $31 to $34 per share when the IPO prices in New York on Wednesday.
The marketing of the IPO is ongoing, and details remain confidential, as confirmed by the sources who requested anonymity. A Reddit spokesperson declined to comment on the matter. Despite initially aiming for a $10 billion valuation, Reddit has adjusted its expectations and now seeks to raise up to $748 million through its IPO.
While Reddit boasts a dedicated user base, it has faced financial losses every year since its inception in 2005. It has struggled to match the commercial success of platforms like Meta Platforms (formerly Facebook) and Twitter. The platform’s focus on niche subjects and its lenient content moderation approach have deterred some advertisers. Reddit relies on volunteer moderators from its user community to manage content on its forums, a system that has faced challenges such as moderator protests in 2023 over changes to data access policies.
Reddit’s platform hosts over 100,000 online forums known as “subreddits,” covering a wide range of topics. Co-founder and CEO Steve Huffman describes these forums as facilitating discussions on various subjects, from the trivial to the existential. Reddit gained significant attention in 2021 during the “meme-stock” saga when retail investors on the “wallstreetbets” subreddit collaborated to trade shares of companies like GameStop.
In an effort to involve retail investors, Reddit has reserved 8% of the IPO shares for eligible users and moderators, certain board members, and associates of its employees and directors. Despite its financial challenges, Reddit reported an average of 73.1 million daily active users in the last quarter of 2023, indicating its continued relevance and engagement among its user base.
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