Reddit advised to target at least US$5 billion valuation in IPO
REDDIT is weighing feedback from early meetings with potential investors in its initial public offering (IPO) that it should consider a valuation of at least US$5 billion, according to sources familiar with the matter, even as it is estimated below that figure in the volatile market for shares of private companies.
The San Francisco-based social media company and its advisers are targeting a valuation in the mid-single-digit billions, the sources said, asking not to be identified as the information is private. The ultimate figure will depend on the IPO market’s nascent recovery, the sources said. Reddit is considering a possible listing as soon as March, they added.
Separately, private trades of Reddit’s unlisted shares have valued the company below US$5 billion. Potential buyers on Rainmaker Securities’ platform have submitted bids indicating a value of between US$4.5 billion and US$4.8 billion. Forge Global Holdings’s database shows a derived price based on secondary activity implying a US$4.8 billion valuation. Such trades sometimes indicate a lower valuation than a company might achieve in an IPO, as private shares are relatively illiquid.
Deliberations around the IPO are ongoing and details such as the valuation target and timing are subject to change. A spokesperson for Reddit declined to comment.
The valuations under consideration demonstrate the extent of tech’s retreat from the heady days of the private funding boom that peaked in 2021. Reddit raised funds that year at a US$10 billion valuation, and could potentially have been valued as much as US$15 billion in an IPO, Bloomberg News reported in 2022.
Instead, the market for first-time share sales froze, tech giants began rounds of layoffs and the companies that did go public were valued at less than where they raised money privately. Instacart, whose valuation peaked at US$39 billion in March 2021, debuted in September 2023 at a US$9.9 billion valuation. As at Friday (Jan 26), it has a market value of about US$7.1 billion.
Reddit, founded in 2005, became an icon of the so-called meme-stock era after a forum on the site, WallStreetBets, jolted the stock market. The trading frenzy in 2021, driven largely by posts on the site, whipsawed the prices of GameStop and AMC Entertainment Holdings. BLOOMBERG
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