Social-media company Reddit is planning to offer shares in its initial public offering to 75,000 of its biggest users when it hits the market next month, the Wall Street Journal reported Wednesday, citing people familiar with the matter.
The move is aimed at building loyalty, but could backfire if the stock falls in its debut.
Reddit CEO Steve Huffman said at The Wall Street Journal’s Tech Live conference in 2021 that he wanted to make any offering more accessible to individuals.
“I want our users to be shareholders, and I want our shareholders to be users,” he said.
The users will have the opportunity to buy the stock at its issue price — an unusual move that is normally preserved for big institutional investors, the people said. That investor base is deemed safer as it generally holds the stock for a longer period than retail investors, who are expected to be more likely to sell on weakness.
Reddit filed confidentially for an IPO in late 2021 and is expected to make its documents public later this month and seek to list on the New York Stock Exchange in March. The company achieved a valuation of $ 10 billion in a fundraising round in August 2021, but valuations have shifted since then.
Reddit is known for its message boards, called subreddits, that allow users to comment and exchange information on a range of topics. One of the most famous is WallStreetBets, which gained notoriety early in the pandemic when investors created the meme-stock phenomenon of frenzied trading in the stocks of companies such as GameStop Corp. GME, -4.46% and AMC Entertainment Holdings Inc. AMC, -3.52%
That forum averages about 70 million users a day.
To be sure, Reddit would not be the first company to place some of its IPO stock with its users. Stock-trading platform Robinhood sold part of its deal to users in 2021. The stock fell more than 8% on its first day of trade and is now trading more than 60% below its IPO price.
Reddit is one of the more prominent deals expected this year amid hopes for a revival of the IPO market, which has languished for the last two years.
A hoped-for rebound failed to fully take hold in 2023 amid geopolitical uncertainty, interest-rate hikes and bank failures.
Read now: IPO freeze gives way to cautious optimism as dealmakers see signs of a thaw
One of the bigger recent deals, that of BrightSpring Health Services Inc. BTSG, -2.61%, which offers home- and community-based services, fell 9% in its debut after pricing $ 2 below its proposed price range, a sign that investors are still pushing back on valuations.
The Renaissance IPO ETF IPO has gained 0.3% in the year to date, while the S&P 500 SPX has gained 4.3%.