Reddit IPO oversubscribed five times: Is a bumper listing expected?
Reddit's initial public offering (IPO) has been oversubscribed between four to five times, as reported by Reuters. This market interest hints that the social media platform is on the right track to reach its targeted share price range of $31 to $34 during its listing on March 20. Oversubscription of an IPO means that investor demand is higher than the available stocks. However, oversubscription does not necessarily predict strong market performance post-IPO.
Reddit's valuation revised from $10 billion to $6.5 billion valuation
Reddit has adjusted its valuation expectations from a previous private fundraising initiative in 2021, which valued the company at $10 billion. The current IPO aims to raise up to $748 million, targeting a valuation of approximately $6.5 billion. Despite this reduction, the company's IPO is still attracting significant interest from investors. An oversubscribed IPO will help Reddit raise additional funds and it might allot more shares from its reserves.
Reddit's unique user base and content moderation challenges
Despite lagging behind social media giants like Meta and X in terms of financial growth, Reddit has maintained a loyal user base since its inception in 2005. The platform is known for its focus on niche subjects and a somewhat relaxed approach to content moderation, which relies heavily on volunteer moderators from user community. However, this approach has occasionally led to conflicts, like in 2023 when many moderators quit over Reddit's mandate to charge third-party app developers for data access.
Reddit hosts over 100,000 online forums or subreddits
Reddit's influence extends beyond its financials, with the platform hosting 100,000 online forums or 'subreddits' that cover a wide range of topics. The company gained significant attention during the 2021 "meme-stock" saga when retail investors on Reddit's 'wallstreetbets' forum collaborated to buy shares of heavily shorted companies like GameStop. As of December 31, 2023, Reddit reported an average of 73.1 million daily active users.
Reddit's stock allocation for loyal users
In a bid to engage retail investors, Reddit has reserved 8% of total stocks on offer for eligible users and moderators on its platform. The reservation is also applicable to certain board members, friends and family of employees and directors. The company plans to list on the New York Stock Exchange under the ticker 'RDDT.' The IPO is being spearheaded by Morgan Stanley, Goldman Sachs, JP Morgan, and Bank of America Securities.
