On Wednesday, Reddit made a major splash in the tech markets by pricing its highly anticipated IPO at $34 per share. This price is at the top end of the expected range, indicating strong investor interest in the social media giant’s public offering set for Thursday. With this move, Reddit was able to raise almost $500 million.
The company, which has been in operation for 19 years, will have an initial valuation of $5.4 billion (excluding employee stock options). This is significantly lower than its most recent private market valuation of $10 billion, which was recorded in August 2021 during the peak of the tech markets boom.
When Reddit makes its debut on the New York Stock Exchange tomorrow, it will be under the ticker symbol “RDDT”. If the stock performs well on its first day of trading, it is likely to encourage other venture capital-backed companies to speed up their IPO processes.
One company keeping a close eye on Reddit’s IPO success is Astera Labs, a provider of connectivity hardware for data centers. On Wednesday, Astera Labs’ stock jumped by an impressive 72% on its first day of trading, signaling a strong market appetite for new publicly traded companies.
However, not all recent IPOs have been met with such enthusiastic reception. Despite being profitable on an EBITDA basis, both Instacart and Klaviyo had lukewarm debuts on Wall Street last year.
It’s worth noting that Reddit is still reporting net losses of over $90 million, which may not sit well with investors who are focused on profitability for newly traded companies.
On the other hand, Reddit’s involvement in the AI industry may be a major selling point for investors. The company has recently started selling its data to Google for training AI models, and there are potentially more licensing agreements in the pipeline. These agreements could become a significant source of revenue for Reddit. In fact, in January of this year alone, the company sold $203 million worth of contracts to AI companies for access to its data, according to a recent filing.
“If Reddit’s stock takes off on its first day of trading, it could serve as a green light for other companies waiting to go public,” said an industry expert.
