News

Can Redditors Revive the I.P.O. Market?

Reddit’s bet on Redditors

Reddit is the latest company set to test the uncertain I.P.O. market, after the unprofitable social media company built around an avid community of newshounds, cryptocurrency devotees and reality TV fans filed to go public.

The company is seeking a valuation of at least $5 billion and DealBook sifted through its prospectus to figure out its pitch to investors.

Its army of users, big-name backers and its bet on artificial intelligence figure prominently. The company sees A.I. helping it turbocharge its ad-sales business and generate new licensing revenue. Reddit confirmed on Thursday that it had signed a deal with Google that’s reportedly worth $60 million a year to help the search giant train its A.I. models.

That will probably appeal to investors, given the boom in A.I. demand that’s fueling a global stock market rally. But whether that’s enough to push Reddit to become profitable is a big question hanging over the listing.

Reddit power users will be allowed to buy in at a price usually reserved for institutions. Such an arrangement is unusual— Uber and the share-trading app Robinhood did something similar — and risky (particularly if, like Robinhood, the stock later sinks.)

Investors should keep that in mind, Joachim Klement, an investment strategist at Liberum, told DealBook. “My view on this I.P.O. is that Reddit is struggling to make a profit and will face a challenge to get a good valuation,” he said.

Related Articles

Back to top button