Reddit priced its initial public offering at $34 per share, the higher end of its expected range, valuing the social media platform at roughly $6.4 billion.
The company’s debut on the New York Stock exchange on Thursday has been highly anticipated given the lull in public listings over the past two years. Reddit is the first major social media company to go public since Pinterest (PINS) in 2019.
The user generated discussion-style platform has been around since 2005, but it gained increased recognition during the meme frenzy in 2021. At that time retail traders on subreddit Wall Street Bets encouraged short squeezes on shares of video game retailer GameStop (GME), theater chain (AMC), and other heavily shorted stocks.
The IPO is expected to gauge investors’ appetite for tech related offerings at a time when monetary policy is tight.
Reddit’s revenue in 2023 jumped about 20% year-over-year to $804 million, according to the company’s S-1 filing. About 98% of sales in the third quarter of last year were generated from advertising on the platform.
The company is not profitable, with its net loss narrowing from $158.6 million in 2022 to $90.8 million last year.
The site had 500 million visitors in 2023 with an average of 73.1 million daily active uniques during the three months ending in December.
Reddit noted its “content is particularly important” for artificial intelligence, or AI, according to its S-1 filing.
“We are exploring business opportunities in licensing data for purposes including machine learning, business analysis, display and training generative AI models,” reads the filing.
Headline venture partner Kamran Ansar says he sees AI more applicable to the site’s content moderation.
“I think, obviously, these days, it’s de jure — you have to mention AI and what you’re doing with it. I think it can help probably with curation,” Ansari told Yahoo Finance.
“And one of the things that’s always been a little spicier with Reddit is the content can be not quite as advertiser friendly,” he said.
In a nod to Redditors, the company set aside 1.76 million shares for sale to eligible users and moderators on the platform, with no lock-up period.
The move lends itself to volatility, says Headline’s Ansari.
“You may see a big run up in the stock price and a drop,” he said. “Because this has such a rabid community around it, the Reddit users, you could see Reddit itself ironically become a meme stock the way that you saw happen with like AMC and GameStop.”
Ines is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre
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