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Reddit IPO prices at top of range to raise US$748 million



Reddit Inc. saw its shares soar Thursday, briefly reaching heights 67% above their initial public offering price. The company, alongside its stakeholders, successfully raised an impressive US$748 million in the IPO.


However, the initial excitement settled a bit as the shares eased back from their peak later in the day. By mid-afternoon, they were trading at $49.39 each, a modest 5.1% increase from their opening price of $47. The IPO had priced at the top end of the range, with 22 million shares sold at $34 each.


At the current trading price, Reddit boasts a market value of $7.85 billion, based on the outstanding shares listed in its filings with the US Securities and Exchange Commission. With stock options and restricted share units factored in, Reddit's fully diluted valuation exceeds $9 billion. Some analysts had previously suggested that the company could warrant a valuation closer to the $10 billion mark based on its performance and potential.


Reddit’s IPO stands out as one of the significant public offerings of the year, ranking fourth in terms of size. The IPO frenzy of 2024 has seen several high-profile debuts, including Astera Labs Inc.'s $713 million offering, which soared 72% on its first day of trading.


The IPO was underwritten by a consortium of top financial institutions including Morgan Stanley, Goldman Sachs Group Inc., JPMorgan Chase & Co., and Bank of America Corp. Reddit’s shares are now listed on the New York Stock Exchange under the symbol RDDT.


One of the factors driving investor interest in Reddit is its burgeoning business related to artificial intelligence (AI). The company is exploring avenues to license its data to third parties for training AI models. It recently inked deals, including one with Alphabet Inc.’s Google, to leverage Reddit data for improving AI technologies.


Reddit's Chief Operating Officer, Jennifer Wong, highlighted the importance of Reddit's vast repository of human-generated content, emphasizing its value in training AI models and providing real-life insights.


The journey to the IPO hasn't been swift for Reddit, spanning over two years, marked by market fluctuations and changing investor sentiments. However, the strong showing of Reddit and other recent IPOs indicates a resurgence in the IPO market, with billions being raised this year alone.


Despite posting losses, Reddit remains optimistic about its future prospects, particularly in advertising, which forms a significant portion of its revenue stream. CEO Steve Huffman expressed confidence in Reddit’s ability to evolve and grow its business, emphasizing the platform's appeal to advertisers seeking high-intent customers.


With key stakeholders holding significant voting power, including Huffman and major investors like FMR LLC, Tencent Holdings Ltd., and OpenAI CEO Sam Altman, Reddit aims to navigate the public markets while seizing opportunities for further growth and innovation.


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