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Reddit Eyes $5 Billion Valuation in Upcoming IPO Amid Market Shift

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Ticker Tea
January 29, 2024

💬 STOCKS MENTIONED: $CART

📝 SUMMARY: Reddit Inc. is actively deliberating its initial public offering (IPO) strategy, with considerations to target a valuation of at least $5 billion. This comes after discussions with early investors and despite current private market valuations placing it below this mark. The San Francisco-based social media giant, along with its advisers, is exploring a valuation in the mid-single-digit billions range. The final decision on valuation will largely depend on the state of the IPO market, which is showing signs of recovery.

Currently, private trades on platforms like Rainmaker Securities and Forge Global Holdings Inc. value Reddit between $4.5 billion and $4.8 billion. These valuations are typically lower than what a company might achieve in an IPO, given the relative illiquidity of private shares. The company, contemplating a listing as soon as March, is still in the process of finalizing details such as valuation and timing, and no official comments have been made by Reddit’s spokesperson.

The ongoing deliberations and potential valuation represent a significant shift from the high valuations seen during the private funding boom of 2021. Back then, Reddit was valued at $10 billion and was even speculated to reach as much as $15 billion in an IPO. However, the changed market dynamics, marked by a freeze in first-time share sales and valuation cuts for tech companies, paint a different picture now. For instance, Instacart ($CART), once valued at $39 billion, debuted at $9.9 billion in its 2023 IPO and currently holds a market value of around $7.1 billion.

Reddit, established in 2005, gained widespread attention during the meme-stock era, particularly through its WallStreetBets forum, which significantly impacted the stock prices of companies like GameStop Corp. and AMC Entertainment Holdings Inc.

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