Reddit’s IPO: Priced at $34 a Share, Marking a Bullish Outlook for Tech

In a sign of investor interest in expanding digital companies, Reddit priced its shares at $34 for its IPO on Wednesday, beyond market estimates.

The social media corporation based in San Francisco had projected that the price range for its shares would be $31 to $34. Reddit’s valuation was $6.4 billion at the $34 price, less than the $10 billion it received in a private funding round in 2021. Through the transaction, the company raised $748 million.

On Thursday, its shares will start trading under the ticker name RDDT on the New York Stock Exchange.

For start-ups and venture capitalists who have been closely observing Reddit’s offering as a test for private Internet companies hoping to face the public markets, the pricing was a positive omen. Just over 100 firms went public in the US last year, which is about a fourth of the companies that went public in 2021, according to data provided by Renaissance Capital, an exchange-traded fund manager that specializes in initial public offerings (I.P.O.s). Activity has been slow.

As for the demand for technology in 2024, Matt Kennedy, a senior strategist at Renaissance Capital, acknowledged some concerns. However, he said that Reddit’s pricing and the artificial intelligence startup Astera Labs’s successful first day of trading on Wednesday were a “positive indication for the remainder of the pipeline.”

The grocery delivery startup Instacart saw one of the most exciting tech business launches last year, and its shares are up almost 58 percent so far this year. In the same time frame, shares of Arm, a chip company that went public last year, have increased by about 90%.

The largest shareholders of Reddit benefit greatly from the offering. They include Advance Magazine Publishers, connected to Condé Nast’s parent business; Steve Huffman, a co-founder with a 3.3 percent share; and Tencent Cloud Europe, a division of Tencent, the massive Chinese internet corporation. The second co-founder, Alexis Ohanian, was not identified as a principal stakeholder in Reddit’s disclosures.

It has taken Reddit a long time to reach the public marketplace. The company, which was founded in 2005, was a pioneer of the social network era, having grown up during the height of MySpace’s popularity and the early stages of Facebook.

Reddit was built on classic message boards, mostly text-based, topic-organized, and viewed by anonymous users. After years of stagnation under the previous administration, the company was spun out and sold to Condé Nast in 2006 for $10 million.

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Reddit’s earnings were meager for many years. It tried a variety of ways to make money, such as a neighborhood-based giving economy that proved popular but did not provide a lot of revenue. 

Reddit saw a turnover of CEOs and a string of community uprisings before seeing a surge in users to over 100 million by 2015. However, the platform only made $12 million in income annually. Mr. Huffman, who had departed in 2006, came back to head the business that year.

Amy Lombard for The New York Times

Since then, Reddit has developed its advertising business, which presently generates the bulk of its revenue. Last year’s revenue of $804 million increased by almost 21% over the previous year. In contrast to the previous year’s $158 million loss, the net loss this year was $90 million.

In addition, Reddit has developed a data licensing business, offering Wall Street corporations and hedge funds access to information on user discussions and trends throughout the site. The firms utilize this information to obtain a trading advantage.In an effort to position itself as a resource for training huge language models—which aid artificially intelligent machines in learning more human-like speaking capabilities—Reddit has more recently made use of its enormous repositories of conversation data. These kinds of agreements, which the corporation has made with Google and other companies, are expected to bring in more than $200 million over the next three years.

The users of Reddit have been perhaps the largest impediment to a seamless I.P.O. The site’s thousands of forums, or “subreddits,” are mostly supervised by a group of moderators who work as volunteers. Some people are opposed to Reddit becoming a publicly traded corporation because they believe some of the aspects that first drew them in will be undermined by market forces and shareholder expectations for quarterly reports.

According to Mr. Huffman, the nervousness associated with being public is a typical “maturation process.”

“We share our community’s love and fear of losing Reddit,” he said in an interview.

Morgan Stanley and Goldman Sachs were two of the investment firms that spearheaded Reddit’s IPO.