There has been a frenzy in U.S. IPO markets for the last 20 months. Social media companies have also joined the party. After Rumble and TMTG (Tump Media & Technology Group), which are listing through a SPAC reverse merger, Reddit has also filed confidentially for an IPO. Here are the details about the IPO date, price, and prospective valuation.
Meanwhile, 2021 hasn’t been a pleasant year for pure-play social media companies. Twitter, Pinterest, and Snap are trading near their 52-week lows, while Facebook, which was the second-best performing FAANG stock, has also pared gains for most of this year.
Reddit became more popular due to WallStreetBets.
Reddit gained a lot of popularity amid the WallStreetBets-driven meme stock mania. The Google searches for Reddit (and WallStreetBets) spiked in the first quarter of 2021. Incidentally, the meme stock mania would go down in history as a key moment for 2021. Retail traders took on the mighty Wall Street fund managers and nearly triggered a collapse of at least one hedge fund.
There was a time when shorting a stock became a risky exercise and WallStreetBets members pounced on every short squeeze opportunity. AMC Entertainment, GameStop, Clover Health, and Blackberry were some of the stocks that soared to astronomical highs amid the meme stock mania.
Incidentally, Reddit has filed for an IPO just when the meme stock trade has unwounded and meme stocks are at a multi-month low. Reddit is much more than WallStreetBets and has several other communities on the platform.
Reddit IPO date and price still aren't known.
Since Reddit has confidentially filed for the IPO, the date, price, and the number of shares on offer haven’t been determined yet. However, the company will provide these details in due course.
While we don’t know about the valuation that Reddit will seek in the IPO, the company was valued at $10 billion in the August funding round where it raised $700 billion. It was the Series F funding round for the social media company, led by its existing investor Fidelity Management and Research Company LLC. Other existing Reddit investors also participated in the funding round.
It was the second funding round in 2021 for Reddit and in February it had raised $500 million at a valuation of $6.5 billion. The company might seek a significant premium over its private market valuations, in line with other growth companies. However, the final IPO price would depend on the response the IPO receives from prospective investors.
What about existing investors?
Apart from Fidelity, Chinese tech company Tencent, which many see as the Berkshire Hathaway of China for its massive investment portfolio, is also a Reddit investor. Sequoia Capital and Andreessen Horowitz are also existing Reddit investors. Meanwhile, it still isn't known whether existing stockholders will also tender their shares as part of the IPO.
Reddit’s revenues have spiked.
Reddit provided a business update while announcing the August funding round. The company’s advertising revenues in the second quarter of 2021 rose by 192 percent to over $100 million. It was the first time that the company’s quarterly revenues came in above $100 million.
In August, the company had over 52 million users with over 100,000 active subreddits. Reddit is largely seen as a liberal company. In 2020, it banned a subreddit “The_Donald,” which was dedicated to Trump, for frequently violating its policies.
While Reddit looks like an exciting and high-growth company, whether you should buy the IPO will eventually depend on the valuation that the company seeks. Watch out for more details as yet another U.S. company seeks to go public amid a red-hot IPO market.