Reddit IPO Heats Up, Could This Be Your Next Hot Investment?

• Reddit, valued at $6.4 billion with an IPO price of $34 per share, is set to begin trading on the New York Stock Exchange under the ticker code "RDDT," following a successful assessment of investor interest by its bankers.

• The platform's popularity stems from its diverse user base engaging in discussions ranging from memes to serious topics, despite its relatively small size compared to tech giants like Meta Platforms (formerly Facebook), valued at over $1.2 trillion.

• Despite accumulating significant losses totaling $717 million, Reddit aims to leverage its IPO proceeds, including $748 million raised, to fuel growth and revenue-generation efforts, with a portion of the funds allocated to compensating selling stockholders and other offering-related expenses.

With a market valuation of $6.4 billion, Reddit, a social networking site, is poised to usher in a new era as a publicly listed corporation. The IPO was priced at $34 per share.

Setting the Stage for Trading

After spending the last two weeks assessing investor interest for the shares, Reddit's investment bankers set a goal range, and that range was reached by the price that was revealed late on Wednesday. This prepares the ground for Reddit's stock to start trading on the New York Stock Exchange on Thursday, with the ticker code "RDDT." The launch is expected to spark a rush of comments on Reddit's site as well as other social networking platforms.

The popularity of Reddit is mostly due to the vast number of users that use the site on a daily basis to debate a wide range of topics, from absurd memes to existential concerns, and to receive suggestions from other like-minded individuals.

Though it has been in business since 2005, Reddit is still incredibly small by the standards of the IT sector.

With Facebook, its largest social media platform, launched just 18 months before Reddit, Meta Platforms is valued at over $1.2 trillion on the market. Reddit's income is still less than $1 billion, but Meta's is $135 billion annually.

Then there is the issue at hand: despite accruing $717 million in total losses, Reddit has never benefited from its wide audience. This amount has increased from the $467 million in total losses that the firm experienced in December 2021 when it originally sought to go public before giving up on that plan.

Reddit ascribed the losses to a relatively recent focus on finding new methods to raise income in the paperwork it submitted for its relaunched IPO.

However, Reddit will now have more cash on hand to support its goals of growing both its income and its impact.

Reddit's IPO Allocation and Financial Breakdown

About $228 million of the $748 million raised during the IPO went toward compensating Reddit stockholders who choose to sell a portion of their ownership. Reddit is allocated an additional $519 million, but the San Francisco-based firm won't get all of that money since it still needs to pay commissions and other offering-related expenses. Before subtracting commissions and costs, bankers have a 30-day window to sell an extra 3.3 million shares, raising an additional $112 million.

Of the 15.3 million shares available for grabs in the IPO, Reddit reserved up to 1.76 million for its platform users. In keeping with standard IPO practice, institutional investors and mutual funds purchased the majority of the remaining shares, placing their bets on Reddit's readiness for financial stardom.