The social media platform Reddit has picked Morgan Stanley and Goldman Sachs to assist with the plans for an initial public offering in March. Reddit was a primary cause behind the meme stock trends of 2021 and its IPO is hoping to reach a valuation of over $15 billion.
The process started in mid-December when Reddit filed a confidential S-1 with the Securities and Exchange Commission. While the exact number of shares to be offered and the potential pricing of the IPO has yet to be disclosed, the fact that Reddit is going public is certain to be one of the big tech stories of the year.
The possibility of Reddit going public has been on the cards for some time, and rumors of an upcoming IPO were heightened when the social media company raised $700 million in a round of funding that had Reddit valued at $10 billion last summer.
Having an IPO at a fairly quiet time of year such as March would certainly add an extra level of interest in how Reddit plans to go public. But whether Reddit has the clout to compete with social media giants like Facebook and Twitter remains to be seen.
Reddit’s path to power
Reddit has shown some shrewd business acumen to reach its current status as its $100 million in advertising revenue earned in the second quarter of 2021 marked nearly a 200% increase compared to the previous year.
With well over 1,000 employees, Reddit has come far from its humble beginnings in 2005. Plus with over 50 million daily users as of last summer, it’s clear that Reddit has found its own special niche in the online domain.
It remains to be seen how Reddit will survive some of the more hostile criticism that has been leveled at social media companies in recent years. With both Facebook and Twitter being accused of fostering misinformation and hate speech, the pressure will be on Reddit to show that it can moderate antisocial behavior on its forums. Plus there will be added emphasis on the social media brand to show how it can monetize its user base even further.
The fact that Reddit gained a massive amount of notoriety for the meme stock trend that hyped the share price of brands like GameStop and AMC will certainly add a level of irony when it comes to the IPO.
However, as the 19th most visited website in the world as of September 2021, it’s clear that Reddit has the brand visibility that would be a dream of many other companies on the stock exchange.
But with many technology stocks being notorious for their volatility as well as being relatively unprofitable in the short-term, buying shares in Reddit could seem risky. This is especially so given the harsh economic backdrop of rising inflation and potentially three interest rate hikes in 2022. All of which should make the IPO of Reddit a fascinating event.