Reddit targets $6.4bn valuation as social media platform prepares for shares debut

The IPO is a major litmus test of investor appetite for new listings

After its launch in 2005, Reddit became one of the cornerstones of social media culture. Its iconic logo is one of the most recognised symbols on the internet.

Reddit is aiming for a valuation of up to $6.4bn (€5.9bn) in its US initial public offering (IPO) of shares, the social media platform has said, as it nears one of the most anticipated stock market debuts of the last few years.

The company, along with some of its existing investors, is targeting a sale of about 22m shares, priced between $31 and $34 each, to raise up to $748m. The IPO, a major litmus test of investor appetite for new listings, will come more than two years after the company began preparations to go public.

So far this year, the IPO market recovery has been uneven. The targeted valuation, on a fully diluted basis, is less than the $10bn Reddit was valued at after a fundraising in 2021.

After its launch in 2005, Reddit became one of the cornerstones of social media culture. Its iconic logo — featuring an alien with an orange background — is one of the most recognised symbols on the internet. Its 100,000 online forums, dubbed “subreddits”, allow conversations on topics ranging from “the sublime to the ridiculous, the trivial to the existential, the comic to the serious”, according to co-founder Steve Huffman. 

Mr Huffman himself turned to one of the subreddits for help to quit drinking, he wrote in his letter. Former US president Barack Obama also did an “AMA” (“ask me anything”), internet lingo for an interview, with the site’s users in 2012.

The company’s influential communities are best known for the “meme-stock” saga of 2021, when several retail investors collaborated on Reddit’s “wallstreetbets” forum to buy shares of highly shorted companies such as video game retailer GameStop. The episode torpedoed hedge funds that had bet against those stocks, and made retail traders a force to reckon with. It was also featured in a 2023 film starring Seth Rogen.

Retail base

To tap into the retail base, Reddit has reserved 8% of the total shares on offer for eligible users and moderators on its platform, certain board members, and friends and family members of its employees.

Such buyers will not be under a lock-up period and could choose to sell their shares on the first day of trading. 

“This is a unique IPO and what happens with it is going to be partly driven by the buzz on the platform,” said Reena Aggarwal, director of the Georgetown University Psaros Center for Financial Markets and Policy.

Weak debuts from Arm Holdings, Instacart, and Birkenstock in 2023 had chilled hopes of a recovery in IPOs. Since the IPO, Arm’s stock has doubled. Instacart has underperformed the S&P 500. Birkenstock is about even with the index.

• Reuters