Expected Reddit IPO Date: Know All About Reddit IPO Valuation

Reddit Stock IPO Overview and Why You Should Invest in Reddit?

Do you know Reddit? It's where you can crowdsource answers to odd questions and uncover great things to do in strange cities. Although the forum looks like a '90s chatroom, it has a strong online presence, an influential user base and a road to going public.

Despite registering an IPO with the SEC in December 2021, Reddit did not go public. After filing its SEC prospectus, Reddit picked "RDDT" and the New York Stock Exchange for its IPO.

The IPO prospectus letter from co-founder Steve Huffman stated that over 76 million people visited Reddit daily in December 2023. You may acquire Reddit shares when it goes public, but the date is unknown.

Key Highlights

  • Reddit, the well-known online discussion site, is all set to open a ticker symbol 'RDDT' at the New York Stock Exchange on its first official trade day.

  • The company mentioned that it wants to have a public offer in March, which will be the biggest debut made by a major social media company since Pinterest in 2019.

  • The company has not yet specified how many shares it will offer at what price range. However, in a funding round in 2021, the company was valued at $10bn.

Reddit IPO Overview 

In June 2005, college buddies Steve Huffman and Alexis Ohanian created Reddit. Huffman developed the coding, and Y Combinator funded the launch.

Huffman and Ohanian sold Reddit to Condé Nast in 2006. It was rumoured to sell for $10–$20 million. After three years on the leadership team, the co-founders left in 2009. CEO Huffman returned in 2015 and remains so.

Conflicts on Reddit

Over time, Reddit has had controversies. The meme stock movement, Huffman's hands-off moderation, and the company's 2023 API ban stand out.

Memes Stock Fluctuations

The meme stock trend began on Wallstreetbets. Nearly 2 million people joined the forum to find and promote attractive stocks.

  • Wallstreetbets bought hedge fund-shorted Gamestop (GME) in 2021. Redditors supported a scheme to inflate GME stock to force hedge firms to cover their short bets. The strategy worked.

  • GME rose from $5 to $120 per share in January 2021. GME shares cost $14 today. All prices are modified for the 2022 stock split. After GME, Wallstreetbets and other online organizations have supported AMC, Blackberry, and Sofi, among other struggling firms.

  • No-touch moderation. Reddit adopted hands-off moderation early on to safeguard free expression. Despite their radical opinions, Redditors were seldom silenced.

  • When asked in 2018, CEO Huffman claimed Reddit's standards don't ban racism or racist comments. His position was that Reddit would discipline behaviours, not ideas. However, Redditors organized a white nationalist protest that killed one person, blurring that difference.

  • Reddit cracked down on hate speech in 2020. The platform tightened standards and shut down hostile subreddits.

  • API cost adjustment. In 2023, Reddit began charging for API use. APIs are code-based connectors used to construct connected apps. Reddit's third-party accessibility and moderation apps used the API for free.

  • Reddit users were furious when one developer stated the pricing hike would force the discontinuation of Apollo for Reddit. To protest, thousands of subreddits staged a "blackout". Moderators locked their subreddits to outsiders.

  • Reddit threatened to remove moderators who refused to reopen communities. Apollo and other third-party apps shuttered after the fee adjustment.

Why Should You Invest in the Reddit IPO?

As of 2023, Reddit has 267.5 million weekly active users, 100,000 active communities, and one billion posts. Revenue increased 21% to $367.6m in 2023, although net loss improved to $90.8m from $158.6m in 2022.

The US amount per user, or ARPU, averaged $3.42 for the last quarter of 2023, which is 2% below its Q4 2022 counterpart. The company said that the drop in the number of advertisers was caused by the pandemic crisis and its international expansion, as the latter contains a significant number of users with a lower ARPU.

Additionally, Reddit is another interesting aspect of its latest IPO, which is that users who are highly active on the platform will be given shares as a result of the offering. Reddit will grant you shares in a tiered program that rewards the users who have significantly contributed to the community, have finished the predefined number of moderator actions or only have a minimum number of karma points - the personal scoring system of the platform.

This is an exceptional possibility for Reddit users to contribute to developing a company they identify with and participate in its destiny. If US consumers take on the view that Reddit is a good platform with a large community, the IPO of Reddit holds lucrative opportunities for them as investors.

How Much Should You Invest in Reddit Stock?

Reddit stock won't be priced until its IPO, and the market will decide its worth. However, like any major purchase, you should know your budget before clicking "buy."

Avoid investing higher than 5% to 10% of your investment portfolio (including 401(k), IRA, and regular brokerage accounts) in individual equities. For simple calculations, if you have $100 to invest, you may only want to put $5 to $10 into equities like Reddit. 

Index funds might make up the rest of your portfolio. Since funds invest in several firms at once, they diversify your portfolio instantly. That way, if one firm underperforms, your portfolio is strengthened by the others.

You may choose how much to buy Reddit stock once it IPOs. If you create an investing account with a fractional share broker, you can pay for the stock in dollars. If the price per share is too high, you can buy a fraction. 

Conclusion

There are no available resources alike to date on the Reddit IPO. As per Reuters, the resolution to go public is set to come perhaps at the end of February, and the IPO is slated for March. There is a window where both the company and the shareholders can capitalize on the authenticity of Reddit's user group. 

The task of Reddit is to show that it can turn its uniqueness into profitable growth going forward. The IPOs of all the companies have the risk, and Reddit is not an exception. Before trading Reddit shares, do enough studying to understand whether it is the right move for your trading activity.

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Noah Willaims 28 Feb, 2024

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