Reddit Targets $5 Billion Valuation... Halved in 3 Years

Ahead of March IPO
10% of Total Shares to be Sold
Valuation Drops Amid IPO Market Contraction

Reddit, the US internet community platform, is expected to be valued at around $5 billion (approximately 6.7 trillion KRW) when it goes public with an initial public offering (IPO) as early as this March. Due to the US Federal Reserve's (Fed) aggressive tightening, which has frozen the capital markets, its valuation, which once exceeded $10 billion (approximately 13.4 trillion KRW), has been halved in three years.

According to Bloomberg on the 28th (local time), Reddit is in contact with potential investors ahead of its March IPO and aims for a valuation of at least $5 billion. Reddit plans to sell about 10% of its total shares through the IPO.

A source familiar with the matter said, "The final figure depends on the initial recovery of the IPO market."

Reddit became famous for leading the craze of 'meme stocks,' which are stocks popular among individual investors through word of mouth online. The current market valuation is below $5 billion. According to Rainmaker Securities, a platform that allows individuals to trade unlisted stocks, Reddit's valuation is estimated to be between $4.5 billion and $4.8 billion (approximately 6 trillion to 6.4 trillion KRW).

This is about half of Reddit's valuation three years ago. Reddit had planned a private IPO in 2021 but postponed the plan; at that time, it was recognized with a valuation of $10 billion during the fundraising stage. After the IPO, the valuation was expected to rise to $15 billion (approximately 20 trillion KRW). This was due to the liquidity released during the COVID-19 pandemic leading to a boom in tech companies. However, since the Fed began raising interest rates in March 2022, liquidity has decreased, and the tech industry as a whole has faced difficulties, causing the valuation to shrink sharply in three years.

The tech industry is struggling not only with IPOs but also with attracting venture capital (VC) investments. According to market research firm PitchBook, investment in US startups decreased for the second consecutive year in 2023, reaching the lowest level in four years. The number of US startup deals involving Tiger Global Management, a US investment firm, dropped significantly from 194 in 2021 to 20 last year, and Andreessen Horowitz, a venture capital firm, saw its deal count fall from 239 to 145 during the same period. The number of deals involving companies invested in by SoftBank plummeted from about 130 to 7.