After this long three years of wait, Reddit IPO announcements are finally out. Reddit on this Thursday filed an IPO prospectus with the SEC. ‘RDDT’ is chosen as the symbol for the Reddit IPO and will be traded on the New York Stock Exchange.

Reddit is a San Francisco-based company valued at $10 Billion in 2021. With this IPO, the company might sell 10% of the company shares, as shared by company officials last year. The IPO prospectus didn’t include a precise figure on the shares, so it’s uncertain about the percentage of company shares for the IPO.

The company is widely popular for its content posting services, where a person can post random content, personal life experiences, questions, etc, and the users can vote and present their opinions.

Everything You Need To Know About Reddit IPO

Even though the IPO idea was introduced years ago, the company had to put it on hold for profitability and volatility-related issues. In 2021, Reddit filed for confidentiality and planned the public filing for this February, which is happening as planned. It’s the first major tech IPO this year and the first social media IPO after Pinterest in 2019.

The next steps include its roadshow launch at the start of March and the completion of the IPO by March end.

Reddit has presented its IPO differently from the traditional one. Usually, the IPO is accessible to institutional investors, but in the case of Reddit, the users and moderators can also access these.

The company explained its perspective on this in the official filing, saying: –

 “Our users have a deep sense of ownership over the communities they create on Reddit. This sense of ownership often extends to all of Reddit. We see this in our users’ passion for their communities, their desire for Reddit to be as amazing as possible, and their disapproval when we let them down. We want this sense of ownership to be reflected in real ownership — for our users to be our owners. Becoming a public company makes this possible. With this in mind, we are excited to invite the users and moderators who have contributed to Reddit to buy shares in our IPO alongside our investors.”

The user’s eligibility for this IPO depends on ‘Karma.’ Karma is the user’s reputation score for the contributions in the Reddit community.

Here, the general IPO Investors will have to accept a formal or informal lock-up agreement that binds them to not sell the allocation of their shares instantly after the start of trading. Reddit users are not subjected to any such restrictions and will play a role in the volatility of the stock. The Risk factor clause also talks about the same.

 “Redditors’ participation in this offering could result in increased volatility in the market price of our Class A common stock.”

What’s the IPO Valuation for Reddit?

During the confidential draft filing for the public offering prospectus with the SEC in December 2021, the company didn’t make the filing available publicly, nor did share about the offered shares and the price range.

The recent filing also didn’t talk about the share percentage that will be allocated through this IPO.

Reddit’s Revenue and Valuation

Reddit’s revenue comes from advertising, premium memberships, and API charges. The membership comes around $5.99 monthly and an annual charge of $49.99. Talking of the API charges, for every 100 calls made to the Reddit API, it charges $0.24.

The company is doing well in terms of revenue and has presented the goals for 2024 already. Reddit’s 2023 advertising revenue was around $800 Million, 20% more than the previous year. The company also reported a lesser net loss of $90.8, whereas the net loss in the previous year was $158.6.

Challenges That You Might Face

IPOs are challenging investments. The risk gets bigger for companies with no history or fewer records to evaluate. IPOs are also subjected to emotional buying that causes the valuation to go up in the initial days, but later that can drop.

With Reddit’s IPO, there are three main challenges: its previous controversies, an unproven business model, and strong competitors like Google, Facebook, Pinterest, etc.

Conclusion

Reddit IPO was on hold for years and is the first IPO for this year. Its user-centric condition gives it a unique touch, and people are waiting to be a part of it. Reddit comes under the list of many top companies, including Google and Facebook, and is finally setting foot to compete with them. Read more trending topics like why SingularityNet is in the hype.

The post Reddit IPO: Unlocking the Insights and Analysis appeared first on CoinGape.

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Filed under: News - @ January 1, 1970 12:00 am