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Reddit's IPO should be interesting — not only because the company is still unprofitable, but also because of how the company has chosen to bring its community of active users and moderators to its public market debut. in New SEC filingReddit says it plans to sell about 22 million shares at a price between $31 and $34. But the IPO could be volatile since Reddit will allow members of its community to sell their shares immediately, rather than being subject to the usual lock-up agreements that typically prevent investors from selling shares for six months after an IPO.
Other outlets reported Reddit will raise up to $748 million With a value of approximately $6.5 billion. However, the company is selling 15 million shares — just a fraction of that 22 million — to raise up to $519 million, she said. The company will not make money from the selling shareholders – the remaining 7 million shares.
The move sets Reddit up to become a meme stock — a term coined in reference to the GameStop short squeeze of 2021, which was led by a group of Reddit users in the r/WallStreetBets community. Users took over hedge funds that had shorted GameStop stock by more than 100% by acting collectively to buy the stock. The goal was to get funds and other investors to cover their short positions rather than take losses as the stock began to rise thanks to Redditors buying shares. The gambit worked as the stock jumped more than 600% within days, with trading halted several times due to its volatility.
By allowing the Reddit community to buy into the IPO, there is once again the potential for the stock to be manipulated — this time, perhaps to Reddit's advantage — through the collective action of Redditors.
However, things could also go badly for Reddit on this front, given that the company has listed r/WallStreetBets as a risk factor in its IPO.
Reddit wrote in its S-1 filing:
“Given the widespread awareness and brand recognition of Reddit, including as a result of the popularity of r/wallstreetbets among retail investors, and the direct access by retail investors to widely available trading platforms, the market price and trading volume of our Class A joint The stock is subject to extreme volatility for reasons unrelated to our core business, macroeconomic or industry fundamentals, which could cause you to lose all or a portion of your investment if you are unable to sell your shares at or above the initial offering price.
In its new filing, the company notes that Redditors in its directed stock program will be able to sell at any time.
“Shares purchased through the Directed Stock Program will not be subject to the terms of the lock-up agreement or market confrontation restrictions,” the document stated.
8% (1,760,000 shares) of Reddit's Class A common stock will be offered through this program to 75,000 eligible Reddit users and moderators, certain board members, and friends and families of employees and directors. Redditors who created an account before January 1, 2024, may be eligible for the Guided Participation Program, provided they reside in the United States and are 18 years of age or older. They'll be invited to participate in “six phased priority tiers,” Reddit says, based on their reputation (or in Reddit parlance, their karma score), or their contributions as moderators.
Since only a set amount of stock is made available through this program, if demand exceeds capacity, a waiting list will be offered.
Reddit first filed its S-1 filing in December, which was announced in February, signaling its intent to go public and making it the first significant tech IPO of the year and the first consumer social IPO since Pinterest in 2019. However, the company struggles to make a profit on a GAAP and adjusted basis, despite its size – the site attracts 267 million weekly active users who interact across its 100,000-plus communities.
More recently, Reddit announced a new revenue strategy that includes licensing its data to various entities building AI tools for $203 million over two to three years, depending on the terms of individual deals.
Reddit will debut on the New York Stock Exchange under the ticker symbol “RDDT.”
Updated 11/3/24 at 12:07 PM with details about stock sales from Reddit regarding the amount raised.
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