Reddit set for stock market debut after pricing IPO at top of range

Social media platform Reddit geared up for its high-profile market debut on the New York Stock Exchange on Thursday, setting the stage for other companies looking to go public.

Social media platform Reddit geared up for its high-profile market debut on the New York Stock Exchange on Thursday, setting the stage for other companies looking to go public this year, while testing investor appetite for new issues.

The San Francisco, California-based company priced its initial public offering (IPO) at the top end of the US$31 to US$34 range it had marketed earlier. The IPO valued Reddit at US$6.4 billion and raised US$748 million for the company and its selling shareholders.

Reddit’s long-awaited stint as a publicly traded company has been in the works for more than two years. It confidentially filed for an IPO in Dec. 2021, but the stock rout due to the Federal Reserve’s quantitative tightening prompted a delay.

The eyeball-grabbing debut will be a major test of the IPO market, where investors are seeing some green shoots, thanks to increasing bets of a soft landing.

“If Reddit trades poorly, it will cast a shadow over the IPO market. Many companies will hit pause on their IPO initiatives,” said Julian Klymochko, CEO of alternative investment solutions firm Accelerate Financial Technologies.

The “meme-stock” saga of 2021, when a group of retail investors collaborated on Reddit’s “wallstreetbets” to buy shares of highly shorted companies like GameStop, helped drive the company’s popularity to new heights.

As part of its plan to reward its user base, Reddit reserved 8% of the shares on offer for eligible users and moderators, certain board members, and friends and family members of its employees and directors.

But the move is fraught with risks, analysts say. Typically shut out of bidding in an IPO, retail traders eager to gain exposure to a newly listed company buy shares only when they start trading, which could lead to a first-day pop.