Reddit Inc. Shares rose 48% from their initial public offering price, as investors embraced the social media company’s vision of profiting from advances in artificial intelligence.
The San Francisco-based company’s stock closed at $50.44 apiece in New York on Thursday, a day after the company and some of its shareholders raised $748 million in an above-market value offering.
Reddit’s IPO is the fourth-largest on a US exchange in 2024, as the market for initial share sales rebounds after two of the slowest years in a decade. A successful listing is set to fire the starting gun for tech companies whose IPO plans have been put on hold.
The AI revolution was at the heart of Reddit’s suggested value proposition for investors, as companies eye record-setting rallies in stocks like chipmaker Nvidia Corp.
“Big language models require data,” Reddit chief operating officer Jennifer Wong told Bloomberg TV. He organized the company’s 19 years worth of “human experience by topic, with moderation and relevancy—incredibly important for building both conversational capability and information freshness. It’s that This is an area where we see opportunity.
A two-year slog
Reddit’s more than two-year scramble to list reflects market volatility, starting with its initial confidential filing in 2021, when IPOs on U.S. exchanges raised $339 billion, according to data compiled by Bloomberg. Set an all-time record. Figures show that IPOs in the U.S. have declined since then, reaching just $26 billion last year.
The company’s shares rose as much as 70 percent on the first day. The closing price of $50.44 apiece gives it a market value of $8 billion based on shares outstanding in its filing with the U.S. Securities and Exchange Commission. Including stock options and restricted share units, Reddit is completely diluted. appraisal is close to $9.5 billion, just shy of the $10 billion figure achieved in the 2021 funding round.
Mandeep Singh, senior industry analyst at Bloomberg Technology, argued before the valuation that the company could be worth as much as $10 billion.
Singh told Bloomberg Radio on Thursday that Reddit’s $34 IPO price was worth Meta Platforms Inc. Eight times more than one, and Snap Inc. and Pinterest Inc. As translated into enterprise value-to-sales multiples among smaller digital ad peers. .
“You pay for growth, and for Reddit, which has accelerated growth over the last 6 months, it just makes a stronger case that it should be at a premium multiple,” Singh said.
Reddit’s IPO in September was topped by large US technology companies Instacart, which raised $660 million, and Klaviyo Inc., with a $659 million offering. While those IPOs failed to start a rush of listings, with British chip designer Arm Holdings Plc’s $5.23 billion offering — the biggest of 2023 — the market has been hot ever since.
About $8.8 billion has been raised this year through IPOs on US exchanges, the data show. That’s up from about 152 percent at this time last year.
Strong showings from Reddit and Astera have led to other IPO candidates such as Microsoft Corp. Backed by data security startup Rubrik Inc. and provides market temperature analysis for healthcare payment company Waystar Technologies Inc.
The IPO was led by Morgan Stanley, Goldman Sachs Group Inc., JPMorgan Chase & Co., according to a Reddit filing. and Bank of America Corp. Were. Shares of Reddit trade on the New York Stock Exchange under the symbol RDDT.
AI Licensing
Like Astera, much of the investor enthusiasm for Reddit can be attributed to its AI business.
Reddit said it is in the early stages of allowing third parties to access data on the platform, including training artificial intelligence models. The company said in January it entered into data licensing arrangements with an aggregate contract value of $203 million and terms of two to three years. Those contracts are expected to generate at least $66.4 million in revenue this year, according to the filing.
Reddit’s Alphabet Inc. has also announced a deal with Google, allowing Google’s AI products to use Reddit data to improve their technology. Optimizing large language models often requires vast repositories of human-generated content.
Wong told Bloomberg TV that original human thoughts and ideas are poised to become more valuable as content is increasingly powered by AI.
“If you think about it, a new car comes out – who’s going to review it?” he said. “A real-life family of six can tell you what it’s like to drive this car. It will always be precious.”
List $713 million in one day Astera Labs Inc. Follows the offer. Astera, a semiconductor connectivity company focused on AI, priced its shares above their market cap on Tuesday and has since gained 78%.
Shrinkage losses
Founded in 2005, Reddit averaged 73.1 million daily active unique visitors in the fourth quarter, according to its filing. The company reported a net loss of $91 million on revenue of $804 million in 2023, compared with a net loss of about $159 million on revenue of $667 million a year earlier.
About 8% of the 22 million shares sold in the IPO were reserved for Reddit users and moderators who created accounts before January 1, as well as friends and family of some board members and some employees and directors. According to Reddit’s filing, those shares are not subject to lock-up, meaning owners can sell them on the first day of trading.
Reddit’s largest shareholder is Advance Magazine Publishers Inc. is, part of the Newhouse family publishing empire that owns Conde Nast, which bought Reddit in 2006 and spun it off in 2011.
Reddit co-founder and chief executive officer Steve Huffman said the company has many opportunities to grow both the platform and the business, according to a signed letter included in the filing.
“Advertising is our number one business, and advertisers of all sizes have discovered that Reddit is a great place to find high-intent customers that they can’t reach anywhere else,” Huffman said. “Advertising on Reddit is growing rapidly, and we’re still in the early stages of growing this business.”
Huffman’s shares give him 3.3 percent of the voting power after the offering, the filings show. This includes Class B shares which will carry 10 votes each compared to Class A shares sold in the IPO. Huffman also has a voting proxy agreement with Advance.
Other major shareholders include Wong as well as FMR LLC and OpenAI Chief Executive Officer Sam Altman, Tencent Holdings Ltd., Vy Capital and affiliates of Quiet Capital and Tacit Capital, according to the filing.
In total, Huffman and these investors hold about three-quarters of the shareholder’s voting rights.
Huffman’s fellow co-founder, venture capitalist Alexis Ohanian, is not listed among the investors holding 5% or more of the shares and is not named elsewhere in the filing.
The San Francisco-based company’s stock closed at $50.44 apiece in New York on Thursday, a day after the company and some of its shareholders raised $748 million in an above-market value offering.
Reddit’s IPO is the fourth-largest on a US exchange in 2024, as the market for initial share sales rebounds after two of the slowest years in a decade. A successful listing is set to fire the starting gun for tech companies whose IPO plans have been put on hold.
The AI revolution was at the heart of Reddit’s suggested value proposition for investors, as companies eye record-setting rallies in stocks like chipmaker Nvidia Corp.
“Big language models require data,” Reddit chief operating officer Jennifer Wong told Bloomberg TV. He organized the company’s 19 years worth of “human experience by topic, with moderation and relevancy—incredibly important for building both conversational capability and information freshness. It’s that This is an area where we see opportunity.
A two-year slog
Reddit’s more than two-year scramble to list reflects market volatility, starting with its initial confidential filing in 2021, when IPOs on U.S. exchanges raised $339 billion, according to data compiled by Bloomberg. Set an all-time record. Figures show that IPOs in the U.S. have declined since then, reaching just $26 billion last year.
The company’s shares rose as much as 70 percent on the first day. The closing price of $50.44 apiece gives it a market value of $8 billion based on shares outstanding in its filing with the U.S. Securities and Exchange Commission. Including stock options and restricted share units, Reddit is completely diluted. appraisal is close to $9.5 billion, just shy of the $10 billion figure achieved in the 2021 funding round.
Mandeep Singh, senior industry analyst at Bloomberg Technology, argued before the valuation that the company could be worth as much as $10 billion.
Singh told Bloomberg Radio on Thursday that Reddit’s $34 IPO price was worth Meta Platforms Inc. Eight times more than one, and Snap Inc. and Pinterest Inc. As translated into enterprise value-to-sales multiples among smaller digital ad peers. .
“You pay for growth, and for Reddit, which has accelerated growth over the last 6 months, it just makes a stronger case that it should be at a premium multiple,” Singh said.
Reddit’s IPO in September was topped by large US technology companies Instacart, which raised $660 million, and Klaviyo Inc., with a $659 million offering. While those IPOs failed to start a rush of listings, with British chip designer Arm Holdings Plc’s $5.23 billion offering — the biggest of 2023 — the market has been hot ever since.
About $8.8 billion has been raised this year through IPOs on US exchanges, the data show. That’s up from about 152 percent at this time last year.
Strong showings from Reddit and Astera have led to other IPO candidates such as Microsoft Corp. Backed by data security startup Rubrik Inc. and provides market temperature analysis for healthcare payment company Waystar Technologies Inc.
The IPO was led by Morgan Stanley, Goldman Sachs Group Inc., JPMorgan Chase & Co., according to a Reddit filing. and Bank of America Corp. Were. Shares of Reddit trade on the New York Stock Exchange under the symbol RDDT.
AI Licensing
Like Astera, much of the investor enthusiasm for Reddit can be attributed to its AI business.
Reddit said it is in the early stages of allowing third parties to access data on the platform, including training artificial intelligence models. The company said in January it entered into data licensing arrangements with an aggregate contract value of $203 million and terms of two to three years. Those contracts are expected to generate at least $66.4 million in revenue this year, according to the filing.
Reddit’s Alphabet Inc. has also announced a deal with Google, allowing Google’s AI products to use Reddit data to improve their technology. Optimizing large language models often requires vast repositories of human-generated content.
Wong told Bloomberg TV that original human thoughts and ideas are poised to become more valuable as content is increasingly powered by AI.
“If you think about it, a new car comes out – who’s going to review it?” he said. “A real-life family of six can tell you what it’s like to drive this car. It will always be precious.”
List $713 million in one day Astera Labs Inc. Follows the offer. Astera, a semiconductor connectivity company focused on AI, priced its shares above their market cap on Tuesday and has since gained 78%.
Shrinkage losses
Founded in 2005, Reddit averaged 73.1 million daily active unique visitors in the fourth quarter, according to its filing. The company reported a net loss of $91 million on revenue of $804 million in 2023, compared with a net loss of about $159 million on revenue of $667 million a year earlier.
About 8% of the 22 million shares sold in the IPO were reserved for Reddit users and moderators who created accounts before January 1, as well as friends and family of some board members and some employees and directors. According to Reddit’s filing, those shares are not subject to lock-up, meaning owners can sell them on the first day of trading.
Reddit’s largest shareholder is Advance Magazine Publishers Inc. is, part of the Newhouse family publishing empire that owns Conde Nast, which bought Reddit in 2006 and spun it off in 2011.
Reddit co-founder and chief executive officer Steve Huffman said the company has many opportunities to grow both the platform and the business, according to a signed letter included in the filing.
“Advertising is our number one business, and advertisers of all sizes have discovered that Reddit is a great place to find high-intent customers that they can’t reach anywhere else,” Huffman said. “Advertising on Reddit is growing rapidly, and we’re still in the early stages of growing this business.”
Huffman’s shares give him 3.3 percent of the voting power after the offering, the filings show. This includes Class B shares which will carry 10 votes each compared to Class A shares sold in the IPO. Huffman also has a voting proxy agreement with Advance.
Other major shareholders include Wong as well as FMR LLC and OpenAI Chief Executive Officer Sam Altman, Tencent Holdings Ltd., Vy Capital and affiliates of Quiet Capital and Tacit Capital, according to the filing.
In total, Huffman and these investors hold about three-quarters of the shareholder’s voting rights.
Huffman’s fellow co-founder, venture capitalist Alexis Ohanian, is not listed among the investors holding 5% or more of the shares and is not named elsewhere in the filing.