Reddit's IPO oversubscribed, set to reach $6.5 billion valuation

Reddit's highly anticipated initial public offering (IPO) is generating significant investor interest, with sources revealing that it is currently between four and five times oversubscribed.

This surge in demand positions the social media platform to potentially achieve its targeted $6.5 billion valuation, signalling a strong market reception despite Reddit's history of financial losses.

The IPO, scheduled to be priced in New York on Wednesday, aims to raise as much as $748 million, representing a pivotal moment for the company as it transitions to a publicly traded entity.

While the oversubscription does not guarantee a soaring stock market debut, it suggests that Reddit is on track to meet its price range of $31-34 per share.

According to Reuters, sources familiar with the matter have indicated that the marketing efforts for the IPO are ongoing, indicating the heightened anticipation surrounding Reddit's public listing.

However, a Reddit spokesperson declined to comment on the latest developments, citing confidentiality.

Reddit, founded in 2005, has cultivated a loyal user base over the years, with its platform hosting a diverse array of discussions across its 100,000 online forums, known as "subreddits."

Despite its popularity, the company has faced challenges in monetising its platform and achieving profitability, trailing behind industry giants like Meta Platforms' Facebook and Twitter.

The platform's unique focus on niche topics and its decentralised approach to content moderation have been points of contention, particularly among advertisers.

Steve Huffman, Reddit's co-founder and chief executive, has emphasised the platform's vibrant and diverse communities, spanning from lighthearted memes to profound discussions on existential topics.

Notably, Reddit gained widespread attention in 2021 during the "meme-stock" frenzy when retail investors coordinated on the "wallstreetbets" subreddit to drive up the prices of heavily shorted stocks, including GameStop.

To engage retail investors and foster a sense of community ownership, Reddit has allocated 8 per cent of the total shares available for eligible users, moderators, board members, and select individuals associated with the company.

This inclusive approach reflects Reddit's commitment to its user-driven ethos and aims to strengthen its connection with the community as it embarks on its IPO journey.

Despite Reddit's financial losses, the platform boasts impressive user engagement, with an average of 73.1 million daily active "uniques" in the final quarter of 2023, according to regulatory filings.

(With inputs from Reuters)