There is significant interest from investors in Reddit's initial public offering (IPO), with reports indicating oversubscription between four and five times. This strong demand suggests that Reddit may achieve its targeted $6.5 billion valuation.
While oversubscription doesn't guarantee a successful debut on the stock market, it indicates that Reddit is likely to meet its expected price range of $31 to $34 per share during its IPO in New York on Wednesday.
Details about the IPO are closely guarded, with marketing efforts ongoing, and sources familiar with the matter preferring anonymity due to confidentiality concerns. Reddit has refrained from making any official comments on the situation.
Initially, Reddit had set high valuation expectations following a $10 billion private fundraising round in 2021 but has since adjusted its targets. The current IPO aims to raise up to $748 million.
Despite having a dedicated user base, Reddit has operated at a loss since its inception in 2005 and has struggled to match the commercial success of rivals like Meta Platforms' Facebook and Twitter (now rebranded as X).
The platform's focus on niche topics and its lenient approach to content moderation have raised concerns among some advertisers. Reddit heavily relies on volunteer moderators from its user base to manage content across its numerous forums.
In 2023, Reddit faced backlash when several moderators resigned in protest against the company's decision to charge third-party app developers for access to its data, highlighting its dependence on volunteer moderators.
With over 100,000 online forums, or "subreddits," Reddit facilitates discussions on a wide array of topics. It gained attention in 2021 during the "meme-stock" frenzy when retail investors collaborated on the "wallstreetbets" forum to purchase shares of heavily shorted companies like GameStop.
To engage retail investors, Reddit has allocated 8 percent of its total shares to eligible users and moderators on its platform, along with select board members, friends, and family of its employees and directors.
According to regulatory filings, Reddit had an average of 73.1 million daily active users in the final three months of 2023.
