Reddit aims for $6.4bn valuation ahead of initial public offering

The social media website is one of the most popular in the world but struggles to make a profit.
Reddit aims for $6.4bn valuation ahead of initial public offering
A hand holding a phone with the Reddit logo on itGetty Images

Reddit, one of the most popular websites in the world, is hoping for a valuation of up to $6.4bn (£5bn) when its shares go public next week.

The social media company, which has never made a profit, will float shares on the New York Stock Exchange.

A filing with the US Securities and Exchange Commission (SEC) revealed that Reddit is hoping to sell 22 million shares for between $31 and $34 each.

However, many users worry the move will fundamentally change the website.

Some shares will be specially reserved for some Reddit users and moderators.

The company is planning an initial public offering (IPO) which would make some of its shares publicly available to buy for the first time.

“Our users have a deep sense of ownership over the communities they create on Reddit,” wrote co-founder Steve Huffman in a letter to prospective investors released a few weeks ago.

“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.”

Reddit, which was founded almost 20 years ago, is an online forum where users can post questions and comment on topics that interest them.

The company makes most of its money through advertising on the platform, although it recently struck a deal with Google which allows the tech giant to access Reddit data to train its artificial intelligence (AI) models.

Reddit has recorded losses every year since its start, including more than $90m last year.

The valuation is also far less than the $10bn at which it was valued in a private fundraising round in 2021.

Currently, the biggest shareholders include media company Advance Magazine Publishers, Chinese tech firm Tencent, US investment firm Fidelity, and Sam Altman, the chief executive of ChatGPT makers OpenAI.

A website built on its users

Reddit, founded in 2005, has a different feel compared with other social media companies such as Facebook or TikTok.

Users often feel freer to write what they like, although subreddits are policed by moderators.

The power of Reddit communities has been seen through examples such as the Gamestop saga in 2021, where users mobilised to drive up the share price of the US video game retailer.

Shares which were initially worth $20 shot up to a peak of $350 after co-ordination from Redditors.

However, some users are worried that the IPO would change the site for the worse.

“When the most important customers shift from [users] to shareholders, the product always [suffers],” said one person.

“It becomes ‘what can we do this quarter to squeak out an additional point of revenue’, instead of ‘how can we make this product better’.”

Source: bbc.co.uk

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