Reddit plans to issue shares to 'most active' users

Reddit is considering selling a portion of its IPO shares directly to approximately 75,000 of its most active users.

Sources familiar with the matter said that Reddit plans to allocate an unspecified number of shares to its most active users, also known as "redditors."

Reddit is planning to launch its initial public offering (IPO) next month, reported Reuters citing a Wall Street Journal report. The report highlighted that users will be granted the chance to purchase Reddit shares at the IPO price prior to public trading, a privilege typically exclusive to institutional investors.

The approach has been attempted earlier as well.

In 2021, trading app Robinhood provided some of its users with stock options during its public offering.

According to the Journal, individual investors, such as users, often tend to sell their shares more rapidly than professional money managers. This contributed to heightened volatility on Robinhood's initial trading day, partly attributable to the strategy.

Bloomberg reported in January that Reddit aims for a $5 billion valuation with its IPO, which is half of its potential valuation in a stock sale three years ago.

In January, Reuters reported that Reddit had outlined comprehensive plans for its upcoming IPO scheduled for March. The company had submitted a confidential filing for its IPO in December 2021. Reddit was valued at about $10 billion in a funding round in 2021.

Reddit's IPO, in development for over three years, marks the first major debut from a social media company since Pinterest's introduction in 2019.

The IPO market continues to grapple with low volumes and several new entrants trading below their IPO prices, indicating a struggle that has persisted for the last two years.