Reddit’s IPO Oversubscribed Four to Five Times, Expected to Reach Targeted Share Price Range

According to Reuters, Reddit’s initial public offering (IPO) has been oversubscribed by four to five times. This strong market interest suggests that the social media platform is on track to achieve its targeted share price range of $31 to $34 when it goes public on March 20. When an IPO is oversubscribed, it means that there is more demand from investors than there are available stocks. However, it’s important to note that oversubscription does not necessarily guarantee strong market performance post-IPO.
Reddit has adjusted its valuation expectations for the IPO. In a previous private fundraising initiative in 2021, the company was valued at $10 billion. The current IPO aims to raise up to $748 million, with a target valuation of approximately $6.5 billion. Despite this reduction, the IPO is still attracting significant interest from investors. An oversubscribed IPO will enable Reddit to raise additional funds, potentially allowing the company to allocate more shares from its reserves.
Although Reddit lags behind social media giants like Meta and X in terms of financial growth, it has maintained a loyal user base since its establishment in 2005. The platform is known for its focus on niche subjects and its somewhat relaxed approach to content moderation, which heavily relies on volunteer moderators from the user community. However, this approach has occasionally led to conflicts, such as in 2023 when many moderators resigned due to Reddit’s decision to charge third-party app developers for data access.
In addition to its financials, Reddit’s influence extends to its hosting of 100,000 online forums known as “subreddits,” which 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 purchase shares of heavily shorted companies like GameStop. As of December 31, 2023, Reddit reported an average of 73.1 million daily active users.
To engage retail investors, Reddit has reserved 8% of its total stocks for eligible users and moderators on its platform. This reservation also applies 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.’ Leading the IPO are Morgan Stanley, Goldman Sachs, JP Morgan, and Bank of America Securities.