Reddit's IPO to Include Redditors and Moderators in Share Purchases

What to know: Reddit, the popular social media platform, is gearing up for its initial public offering (IPO) with a projected valuation of up to $6.4 billion. This move marks a departure from traditional IPO practices as Reddit plans to offer shares not only to institutional investors but also to its contributors, including Redditors who engage in discussions and the moderators who oversee the platform. The IPO is set to include 22 million shares priced between $31 and $34, potentially raising around $750 million. Additionally, Reddit intends to sell 1.76 million shares to certain board members, employees, friends, and family members without lock-up agreements, allowing them to sell immediately.

Looking ahead: One of the unique aspects of Reddit's IPO is the inclusion of Redditors and moderators in purchasing shares, a departure from the norm where IPO shares are typically reserved for institutional investors. This approach introduces the possibility of share-price volatility due to the potential influence of these users on Reddit's stock value. The company's decision to involve its community in the IPO reflects its acknowledgment of the significant role users play in shaping the platform's content and success. While this strategy may present risks, such as alienating supporters if mishandled, it aligns with Reddit's user-centric business model.

Deeper details: Reddit has introduced a directed share program that allows active Redditors to participate in its IPO by purchasing shares at the same price as institutional investors. Eligible users had until March 18 to indicate their interest and must complete their applications by that date. The company plans to set the IPO price between $31 and $34 per share on March 20, with Redditors having a window until March 21 to make their purchases. This initiative aims to involve users who have contributed significantly to Reddit's community in owning a part of the platform, fostering a sense of ownership and engagement among its dedicated members.

The backstory: The decision by Reddit to offer shares to its users and moderators underscores its commitment to community engagement and empowerment. By allowing Redditors with established accounts before January 1, 2024, to participate in the IPO based on their contributions and engagement metrics, Reddit is reinforcing the idea of shared ownership and involvement in the platform's future. This innovative approach not only differentiates Reddit's IPO but also reflects a strategic move to strengthen user loyalty and deepen the connection between the platform and its community.