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Reddit wants up to $6.4 bln value in much-awaited US IPO

Reddit logo is visible in this image shot November 7, 2022

March 11 (mod1s) - Reddit is looking for a value of up to $6.4 billion in its U.S. initial public offering (IPO), the social media network announced on Monday, as it nears one of the most anticipated stock market debuts of the past several years. 

The business, together with some of its current investors, is aiming a sale of around 22 million shares, priced between $31 and $34 apiece, to generate up to $748 million. 

The IPO, a crucial litmus test of investor enthusiasm for fresh listings, will come more than two years after the business started plans to go public. So far this year, the IPO market rebound has been patchy.

The projected valuation, on a fully diluted basis, is less than the $10 billion Reddit was valued at following a financing in 2021. 

After its introduction in 2005, Reddit became one of the mainstays of social media culture. Its unique logo - displaying an alien on an orange backdrop - is one of the most known emblems on the internet. 

Its 100,000 online forums, nicknamed "subreddits", enable talks on themes ranging from "the sublime to the ridiculous, the trivial to the existential, the comic to the serious", according to co-founder Steve Huffman.

Huffman personally resorted to one of the subreddits for aid to stop drinking, he noted in his letter. Former U.S. President Barack Obama also held a "AMA" ("ask me anything"), internet terminology for an interview, with the site's users in 2012. 

The company's powerful communities are most known for the "meme-stock" story of 2021, when many retail investors worked on Reddit's "wallstreetbets" forum to acquire shares of widely shorted businesses such as video game retailer GameStop (GME.N), opens new tab.

The experience sank hedge funds that had bet against those equities, and made ordinary traders a force to reckon with. It was also included in a 2023 film starring Seth Rogen. 

To get into the retail base, Reddit has reserved 8% of the total shares on sale for qualified users and moderators on its site, some board members and friends and family members of its workers and directors. 

Such purchasers will not be under a lock-up period and might opt to sell their shares on the first day of trade, thereby exacerbating the price volatility. 

"This is a unique IPO and what happens with it is going to be partly driven by the buzz on the platform," said Reena Aggarwal, director of the Georgetown University Psaros Center for Financial Markets and Policy.

Weak debuts from Arm Holdings , Instacart (CART.O), opens new tab and Birkenstock (BIRK.N), opens new tab in late 2023 had cooled expectations of a comeback in IPOs as the U.S. stock market came from a major selloff the year before. 

Since the IPO, Arm's stock has more than doubled. Instacart has underperformed the S&P 500 (.SPX), opens new tab while Birkenstock is about level with the index. 

Morgan Stanley, Goldman Sachs, J.P.Morgan and Bank of America Securities are the main underwriters for the offering. Reddit intends to list on the New York Stock Exchange as "RDDT."

LIMITED COMMERCIAL SUCCESS 

Despite its cult-like popularity among followers, Reddit has trailed the success of contemporaries such as Meta Platforms' Facebook (META.O), opens new tab and Twitter, now known as X. 

The firm has never produced a profit, and declared in its filing previously that it was "in the early stages of monetizing (its) business". 

Reddit has an average of 73.1 million daily active "uniques" - people who use the site at least once a day - in the three months ending Dec. 31, 2023, it said. 

The company's fairly liberal approach to content control has also been a sticking point with marketers.
It depends on volunteers from its user base to regulate the information posted on its forums. Moderators may opt to depart from their role at any moment, as during 2023, when some left in protest over Reddit's proposal to charge third-party app developers for access to its data. 

"There's no question that as a public company, Reddit is going to be under much more scrutiny in terms of their platform, what's being put out on the platform and how it's being monitored," Aggarwal added.
"Regulators and policymakers are quite concerned about these issues."


Source: https://www.reuters.com/

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