Reddit prices IPO at $34 per share, the top of the rangeReddit priced its stock on Wednesday at $34 a share, the top of the anticipated range, a signal that investors are excited about the company’s IPO on Thursday.
The social media giant raised nearly $500 million in the offering.
Despite being profitable on EBITDA basis, Instacart and Klaviyo, two main IPOs of 2023, had lukewarm receptions on Wall Street last year.
But Reddit is still generating net losses of more than $90 million, which may bode poorly for the company’s stock amid push for profitability for newly traded companies.
The firm sold $203 million worth of contracts to AI companies for access to its data in January, according to a recent filing.
Astera Labs started its life as a public company trading at $52.56 per share, up 46% when the bell rang.
Astera Labs makes connectivity hardware for cloud computing data centers.
Astera Labs’ IPO price valued it at around $5.5 billion, a figure that swells to around $8.9 billion at its current trading price.
The strong performance of Astera in its first hours as a public company could also ameliorate some investor activity that is holding back, or even preventing some public offerings altogether.
If VCs know that the startup could pop on the public market like Astera Labs, maybe they will think about the timeline differently.
Astera Labs IPO will reveal how much investors want in on AI Startups with an AI angle would do well to pay attentionWhile the technology world breathlessly awaits Reddit’s public debut, another company you might never have heard of is about to go public: Astera Labs.
While Reddit’s IPO could do well from investors looking to buy a well-known social media company that has an interesting, burgeoning AI data business, Astera Labs is an AI hardware story.
So, on an annual basis, this is far from the kind of profitable company IPO experts say this harsh market requires.
In the third quarter of 2023, Astera Labs’ revenue began growing dramatically: from $10.7 million in Q2 2023 to $36.9 million in Q3, and $50.5 million in Q4.
Putting it all together: Astera Labs has caught a wave thanks to AI data center spending.
Late-stage VCs may be preventing their startups from going public in 2024 Founders might have unintentionally given their VCs too much power to block an IPOWhile some investors are loudly bemoaning that the IPO window can’t stay shut forever, other VCs themselves are actually part of the problem.
It’s a common term for late-stage investors agreeing to pay higher prices for their stake to boost a startup’s valuation.
When late-stage startups raised at sky-high valuations in 2021 they may not have realized how much power they were giving their late-stage investors if the market cooled, which it did.
“People confuse up and to the right, with a god-given right,” Hinkle said.
He added that there is always a lot more friction between investors and startups about the decision to IPO than investors would like to admit.
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Mary Ann is off on a well-deserved break, so we brought on fellow podcaster Rebecca Szkutak to take advantage of her insight and humor for this episode.
The secondary market allows for that now.”Stripe’s recent secondary sale is a clear example of this.
Leung said that Sapphire deployed roughly $500 million into the secondary market in 2023, and expects to deploy the same if not more into secondary stakes in 2024.
But given the maturation of the secondary market, it doesn’t need to thaw before the market is really ready.
The secondary market “is playing a huge role,” Leung said regarding companies waiting to go public.
[LPs] are not pressuring the GPs to push out their assets, which reduces the demand for the public market.”
The long-running dearth of IPOs could be coming to a close, partly due to Reddit’s upcoming public debut.
Expected to list this month, Reddit saw its valuation soar during the pandemic.
If Reddit’s IPO does well, it could wiggle open the public-offering window just a little bit wider than we’ve seen in quarters and quarters.
Of course, the public offering could also fizzle out like an unpopular opinion downvoted to hell on the site.
But with an AI-friendly growth story to tell, Reddit may have timed its ramp towards the public markets just right.
At the low end of this range, $31 billion, though Reddit would be worth $4.93 billion based on an expected 158.98 million shares outstanding.
With $804.0 million in 2023 revenue, Reddit is on track to trade for a multiple of 6.9x to 8.0x its revenue, depending on the valuation estimate you want to use.
Reddit’s game plan for AI is one good reason why it’s pricing its shares closer to Meta than Snap.
Reddit data constantly grows and regenerates as users come and interact with their communities and each other.
Investors might consider Reddit a side-bet on AI itself, even if the company’s core business isn’t creating AI models.
Listen here or wherever you get your podcasts.
Hello, and welcome back to Equity, the podcast about the business of startups, where we unpack the numbers and nuance behind the headlines.
This is our Monday show, in which we take a look back at the weekend and what’s ahead in the week.
Over the weekend, we dropped an interview with Roger Lee that is well worth your time, and here’s our take on Reddit’s IPO financials.
Here’s what we got into today:
In a new SEC filing, Reddit says it’s planning to sell around 22 million shares, priced between $31 to $34, potentially raising around $748 million at the high end of that range.
But the IPO could be volatile given that Reddit will allow its community members to sell their shares immediately, instead of being subject to the usual lock-up agreements that typically prevent investors from selling shares for six months after the IPO.
The move sets up Reddit to become a meme stock — a term coined in reference to the wild GameStop short squeeze of 2021, which was driven by a group of Reddit users on its community r/WallStreetBets.
The users had taken on the hedge funds that had shorted GameStop’s stock by over 100% by working collectively to buy the stock.
By allowing the Reddit community to buy into the IPO, there’s again potential for the stock to be manipulated — this time, possibly in Reddit’s favor — by Redditors’ collective action.
