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Reddit Reportedly Will Price IPO at $34 Per Share, in Positive Sign for Tech| GuyWhoKnowsThings

reddit on Wednesday it priced its shares at $34 for its initial public offering, two people with knowledge of the matter said. The price was at the high end of expectations, in a sign of investor demand for growing technology companies.

The San Francisco-based social media company had estimated its shares would be priced between $31 and $34. The $34 price puts Reddit's value at $6.4 billion, below the $10 billion valuation it earned in a private fundraising round in 2021. The company raised $748 million in the offering, said the people, who spoke on condition of anonymity.

Its shares will begin trading Thursday on the New York Stock Exchange under the symbol RDDT.

The price was a favorable sign for startups and venture capitalists, who have been closely watching Reddit's offering as a test for private tech companies looking to challenge public markets. Activity has been slow, with just over 100 companies going public in the United States last year, about a quarter of those going public in 2021, according to data compiled by Renaissance Capital, which manages exchange-traded funds that They focus on IPOs.

“There was some concern about technology demand going into 2024,” said Matt Kennedy, senior strategist at Renaissance Capital. But Reddit's price, along with a successful first day of trading on Wednesday for Astera Labs, an artificial intelligence company, was a “good sign for the rest of the process,” he added.

Stock of one of the most popular technology companies of last year: instacart, the grocery delivery company, are up about 58 percent this year. Actions of Arm, a chip designer which also went public last year, have risen about 90 percent in the same period.

The offering is a boon for Reddit's largest shareholders. They include a co-founder, Steve Huffman, who owns a 3.3 percent stake; Advance Magazine Publishers, affiliated with the parent company of Condé Nast; and a unit of Tencent, the Chinese internet giant, called Tencent Cloud Europe. Alexis Ohanian, the other co-founder, was not listed in Reddit documents as a major shareholder.

Reddit's road to the public markets has been a long one. Founded in 2005, the company was one of the first forms of social networking and grew when Facebook was still nascent and MySpace was at its peak.

Reddit relied on old-school style message boards, which were largely text-based, divided by topics, and navigated by pseudonymous commenters. The company was sold to Condé Nast in 2006 for $10 million and then spun off after years of stagnation under previous management.

For years, Reddit's revenue was meager. He experimented with different ways to make money, including a community-based donation economy that some enjoyed but that didn't produce strong results. After a series of community revolts and a revolving door of CEOs, in 2015 Reddit had more than 100 million users but only $12 million in annual revenue. That year, Mr. Huffman, who had left in 2006, returned to run the company.

In the years since, Reddit has built up its advertising business, which now accounts for the vast majority of the company's revenue. Revenue was $804 million last year, up about 21 percent from the previous year. The net loss was $90 million, compared with a loss of $158 million a year earlier.

Reddit has also built a data licensing business, selling information about its users' discussions and trends across the site to hedge funds and Wall Street firms, which use the information to gain a trading edge.

More recently, Reddit has leveraged its vast troves of conversation data to promote itself as a repository for training large language models, helping AI computers learn more human-like speech skills. The company expects to earn more than $200 million in the next three years thanks to this type of agreements it has closed with Google and others.

Perhaps Reddit's biggest obstacle to a smooth IPO has been its users. The thousands of forums, or “subreddits,” that make up the site are largely overseen by a group of volunteer moderators. Some have resisted the idea of ​​Reddit being a public company, worried that market forces and quarterly shareholder demands would eat away at some of the features that made the site so attractive to them.

Huffman has said that anxiety about going public has been part of a normal “maturation process.”

“We have the same love for Reddit, and the same fear of losing Reddit, as our community,” he said. he told the New York Times last year.

Among the investment banks that led the Reddit offering were Morgan Stanley and Goldman Sachs.

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