Reddit's impending IPO is up to five times oversubscribed, report says

By James Rogers

Social-media platform's IPO is expected this week

Reddit's closely watched initial public offering is between four and five times oversubscribed, according to a Reuters report.

Citing people familiar with the matter, Reuters reports that the social-media platform is set to at least reach its target price of $31 to $34 a share. The IPO will price Wednesday, the report said.

Reddit declined to comment, citing the quiet period during which companies are not allowed to publicly comment on their IPOs before they start trading.

Related: Reddit could use this strategy to 'monetize aggressively' following its IPO

In an amended filing last week, Reddit said it plans to offer 22 million shares at a price range of $31 to $34. At the top of the price range, and including potential vested options and restricted stock units, the company's total share count would be 188.7 million shares valued at $6.4 billion. This is significantly below its previous valuation of $10 billion.

Reddit's stock will trade under the symbol RDDT on the New York Stock Exchange.

The company's IPO will be closely watched by a number of companies considering public offerings, according to Greg Martin, co-founder of private securities broker-dealer Rainmaker Securities.

Related: Reddit's IPO could open door 'a little bit more' for other public offerings in 2024

"I do think it's noteworthy. People are going to be paying attention to it," he told MarketWatch last week, adding that it could open the door "a little bit more" for other IPOs. Rainmaker Securities does not hold a position in Reddit.

Reddit is not yet profitable, although the company has been touting the importance of artificial intelligence to its future, noting that its content could be used to feed AI and large-language models.

The company's revenue was $804 million in 2023, an increase of 21% from 2022.

Related: Why Reddit is 'walking a tightrope' with its IPO

Set against this backdrop, the social-media platform plans to push deeper into advertising, data sales and analytics.

Reddit is also inviting users and moderators who have contributed to the social-media platform to buy shares in its IPO. Users and moderators who created an account on or before Jan. 1, 2024, and are "in good standing" are potentially eligible for the directed-share program, the company said in its S-1 filing.

But similar moves from Robinhood Markets Inc. (HOOD) and Deliveroo PLC (UK:ROO) resulted in post-IPO volatility, according to Alan Vaksman, founding partner of venture fund Launchbay Capital. "The history of that strategy looks more like PR to me than something that will support the valuation in the long term," he told MarketWatch last week. "It creates this short-term volatility."

Launchbay Capital does not have a position in Reddit, he said.

Related: Why Reddit faces a difficult IPO

-James Rogers

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03-18-24 1245ET

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