Reddit IPO oversubscribed five times

Reddit IPO oversubscribed up to five times, sources say

In this illustration taken on July 13, 2021, the Reddit app is seen on a smartphone.

NEW YORK – Reddit's initial public offering is now four to five times oversubscribed, people familiar with the matter said on Sunday, making it more likely that the social media platform will reach the $6.5 billion valuation it is seeking.

While oversubscription doesn't guarantee a strong stock market debut, it means the company is on track to at least hit its target price range of $31 to $34 per share when it prices its IPO in New York on Wednesday, sources said.

Marketing for the IPO is continuing, the sources said, asking not to be identified because the details are confidential. A Reddit spokesperson declined to comment.

Reddit has tempered valuation expectations after completing a $10 billion private financing round in 2021.

read: Reddit's long-awaited U.S. IPO valuation targets as high as $6.4B

Despite the loyalty of many users, Reddit has lost money every year since launching in 2005 and lags behind the commercial success of contemporaries like Meta Platforms' Facebook and Twitter (now known as X).

Limited commercial success

The focus of many Reddit users on niche topics and the platform's lax attitude toward content moderation have been sticking points for some advertisers. Reddit relies on volunteers from its user base to moderate content posted on its forums.

Moderators can decide to step back from their duties at any time, as they did in 2023, when several moderators resigned in protest of Reddit's decision to charge third-party app developers for access to their data.

Read: Reddit allows rewarding users for buying on its IPO, and it looks like everyone is interested

Reddit's 100,000 online forums, known as “subreddits,” allow for conversations about topics ranging from “the sublime to the ridiculous, the trivial to the existential, the hilarious to the serious,” said co-founder and CEO Steve Huffman.

The company's influential community is famous for the “meme-stock” saga of 2021, when several retail investors collaborated on Reddit's “wallstreetbets” forum to buy shares of highly shorted companies such as video game retailer GameStop.

To attract retail investors, Reddit reserves 8% of the total offering shares for eligible users and moderators on its platform, certain board members, and friends and family of employees and directors.

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According to a regulatory filing, Reddit had an average of 73.1 million daily active “unique users” (users who use its platform at least once a day) in the three months ended December 31, 2023.

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