The long-awaited Reddit IPO could finally be upon us, with the company looking at a valuation as high as $6.5 billion, which would put its share in a target range between $31 and $34 under a ticker RDDT at the New York Stock Exchange.
Specifics of the offering, such as its size and timing, are subject to potential changes. According to the US Securities and Exchange Commission (SEC) filings, Morgan Stanley, Goldman Sachs, JPMorgan, and Bank of America manage the IPO.
However, its subreddit, r/WallStreetBets, could target RDDT stock as its subsequent acquisition, leading to a short squeeze.
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Previous valuations and attempts of IPO
The projected valuations represent a considerable pullback from the peak valuations witnessed during the tech industry’s pandemic boom.
In 2021, Reddit secured funding that valued the company at $10 billion, and the following year, the company’s IPO could have potentially valued it as high as $15 billion.
Recently, Reddit has been considering feedback from initial discussions with potential IPO investors, suggesting it should contemplate a valuation of at least $5 billion. The company had been aiming for a valuation in the mid-single-digit-billion range.
The company intends to commence marketing its shares to potential investors on March 11, according to Bloomberg.
Additionally, Reddit is considering allowing some employees to sell stock in the IPO, as reported by sources familiar with the matter. The company had previously disclosed its plan to allocate shares in the IPO for purchase by users and moderators of its platform.
WallStreetBets could make RDDT stock highly volatile
In its S-1 filing on February 22, Reddit highlighted r/WallStreetBets as a potential risk to investing in the company, citing the subreddit’s involvement in the meme stock frenzy of 2021. During this time, retail investors collaborated to drive up the prices of struggling companies such as GameStop (NYSE: GME) and AMC Entertainment Holdings (NYSE: AMC), aiming to disrupt professional investors on Wall Street and cause them financial losses.
Reddit expressed concern that the same group of retail investors, comprising 15 million members on r/WallStreetBets and other online forums, could similarly impact the price of Reddit’s stock. The company warned that this volatility could result in investors losing some or all of their investment if they cannot sell their shares at or above the IPO price.
The company also noted that historical evidence suggests that surges of interest and heavy investment, like those orchestrated by r/WallStreetBets, do not necessarily translate into long-term success for companies.
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