The social media platform plans to go public on Wednesday looking to raise up to $748 million through the sale of 22 million shares.
ADVERTISEMENTDays before the social media platform debuts on the New York Stock Exchange, the interest for Reddit’s stocks is between four and five times oversubscribed, according to Reuters.
Reddit is going to be publicly traded after its Initial Public Offering (IPO) on Wednesday, where the San Francisco-based company is seeking a $6.5 billion (€5.96 billion) valuation, equalling a price range of between $31 and $34 per share.
The company wants to raise as much as $748 million (€686 million), selling 22 million shares, some of which are to be offered to its contributors, in what is seen to be an unusual move.
What generally ahead for a short time before a typical IPO, is that the company planning on going public targets institutional investors and fund managers to whom it sells its stock. They in turn begin trading the stock on the open market. This marketing period gives the listing company a strong idea of what share price they are likely to get. That will eventually dictate the market value of the company.
In a break with tradition, however, Reddit is one of the first online companies to offer shares to its contributors – the “Redditors” who comment on its boards (and had established accounts as of 1 January this year) and the moderators who manage them.
What is the business potential of Reddit?
Profitability is certainly a concern, as the 18-year-old social media platform has lost money every year since its launch in 2005, noted Reuters.
The potential is there, however. Reddit has some 100,000 subreddits, different online forums grouped around different topics – which could be a dream for advertisers.
Not all Redditors are supportive of the IPO move. Some Reddit users are concerned the platform may be forced to let go of its main values because it will need to meet investors’ and advertisers’ demands.
However, the independent platform, moderated by its own users in a voluntary system, may not entirely tick all the boxes of Wall Street.
One of the users – SellingFirewood – commented on the subreddit forum: ‘Are you buying the Reddit ipo?’:
“As with any website, Reddit will go public, shareholders will complain about the lack of increasing revenue, reddit will implement annoying/unskippable ads, companies will complain that they don’t want their ads featured on r/buttholes, then Reddit will become more strict on the content it allows. Reddit will slowly die with the dissapearance of all of the NSFW [‘Not safe for work’, ed.] pages. It’s a tale as old as time itself.”
Meanwhile, there is speculation the platform could tap into AI-related money-making opportunities, after the US Federal Trade Commission opened an inquiry into the social media platform’s sale, licensing or sharing of its users’ posts and other content to outside organisations for use in training artificial intelligence models.
