Reddit wants to raise $748M with IPO, sets value at $6.4B... and it has yet to turn a profit

Time to start spamming those reposts: Top users are getting early access to 1.76 million shares

Redditors hoping to get in early on the company's upcoming IPO had better hope they have a lot of karma in reserve.

The "front page of the internet" posted an amendment to a previous Securities and Exchange Commission filing detailing more of its IPO plans, including pricing information and what the company thinks it is worth.

According to the amended S-1 form, Reddit and its investors will be placing approximately 22 million shares for sale when it finally decides to go public "as soon as practicable" at a price between $31 and $34 a piece. At the high end that could raise around $748 million.

As per the filing, Reddit states:

"Reddit, Inc. is offering 15,276,527 shares of its Class A common stock and the selling stockholders identified in this prospectus are offering an aggregate of 6,723,473 shares of Class A common stock. This is our initial public offering and no public market currently exists for shares of our Class A common stock. We will not receive any proceeds from the sale of shares of common stock by any of the selling stockholders."

When factoring in restricted stock units, vesting options and additional shares being held by the deal's underwriters, Reddit's filing indicates a valuation of around $6.4 billion. That is a nod to the value of Reddit's massive repository of user posts and comments - 850 million monthly users - and its use as an AI training tool for companies like Google, which recently paid $60m for the rights to slurp up user content to train Gemini.

Reddit has already used that agreement to create an AI-powered harassment filter for moderators.

Unless someone else jumps into the ring with very rapid IPO plans, Reddit will be the first tech stock to launch in 2024, and the first social media company to go public since Pinterest in 2019. 

Whether Reddit's stock price will stay above its initial offer is anyone's guess - the company hasn't ever turned a profit since coming online in 2005. 

What the repost bots have been waiting for

Along with spelling out terms of its valuation and the introductory price of future shares, Reddit also posted additional details about its direct share program, through which it plans to hold 8 percent of its IPO shares in reserve for eligible Reddit users, moderators, board members and friends and family. 

Eligibility for the direct share program isn't very steep - Reddit users and moderators only have to have an account created on or before January 1 of this year to qualify for early access to the 1,760,000 shares being set aside for the program.

Getting a decent spot in the queue, on the other hand, won't be as easy.

Reddit is planning six tiers of early access based on each "participant's contributions to Reddit," the company said in its updated SEC filing. Those tiers are based on a user's "karma" score, ostensibly an aggregate total of up/down votes on posts and comments.

The first tier of users will be those "who have meaningfully contributed to Reddit community programs," though what that means isn't explained more clearly. After that come tier 2 users, who must hold at least 200,000 karma points or have taken at least 5,000 moderator actions. Tier three includes users and moderators who hold at least 100,000 karma points and have taken 2,500 moderator actions. Tiers 4 and 5 are each half of the previous tier's total, and tier 6 includes everyone else, with a waitlist available if the total number of shares purchased exceeds the original 1.76 million. 

Even better for the terminally online and all those repost bots that have managed to fly under the radar? The Reddit shares aren't subject to the 180 lockup period, so those highly valued users are free to ditch their shares if prices start to fall. ®

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