Benzinga - Social media company Reddit could be going public in the second half of 2023 according to a new report. Here’s a look at how investors can own a piece of the company before the listing.
What Happened: Reddit is nearing an IPO and expected to go public in the second half of 2023. The IPO could be one of the most anticipated in recent years, with many retail investors familiar with Reddit and some investing as a result of popular subreddits like WallStreetBets.
Reddit filed paperwork to go public in December 2021, but market conditions have impacted the timeline of a potential IPO, according to the report from The Information.
Reddit competes with other social media platforms like Twitter, Facebook and others for online visitors’ time spent making posts, reading posts and following along on specific topics.
The social media company was founded in 2005 by Alexis Ohanian, Steve Huffman and Aaron Swartz. The company was later sold for $10 million to Conde Nast in 2006.
Reddit completed a 2021 Series F funding round led by Fidelity that valued the company at $10 billion. No details were given on the expected valuation of the potential Reddit IPO.
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Owning a Piece of Reddit: Prior to the highly anticipated public listing of Reddit, investors have a way to get exposure to the company.
Reddit has completed eight funding rounds, bringing in $1.3 billion from different investors, according to data from Crunchbase.
Fidelity led the 2021 funding round and is one of the key shareholders of Reddit. Other investors include Sequoia Capital, Andreessen Horowitz and Vy Capital.
Another investor in Reddit is Chinese entertainment and gaming conglomerate Tencent Holdings (OTC: TCEHY), whose stock investors can buy.
Tencent invested in Reddit in 2019 and 2020 through two separate funding rounds. According to TechCrunch, Tencent invested $150 million in 2019 and $150 million in 2020. In each round, Tencent was valued at between $2.7 billion to $3 billion.
In total, Tencent has invested $300 million in Reddit at a valuation of $3 billion or less. Based on a valuation of $10 billion in 2021, the investment by Tencent has more than tripled, assuming it still owns the full stake.
Tencent owns a stake of between 5% and 10% of Reddit, according to reports.
If Reddit is valued at more than $10 billion with an IPO in 2023, an investment in Tencent today could see an increase in valuation.
The value of Reddit could be calculated into a sum-of-the-parts valuation of Tencent, or the conglomerate could choose to sell off the Reddit stake after the IPO lockup period is over to unlock shareholder value.
Along with its Reddit stake, investors in Tencent get exposure to one of the largest gaming companies in the world. Tencent is the owner of Riot Games, the maker of “League of Legends,” and Supercell, a key mobile games developer.
Tencent also owns around 40% of Epic Games, the maker of “Fortnite.”
Outside of gaming, Tencent also has investments in social media, streaming, music, ecommerce, artificial intelligence and other sectors.
Investing in Tencent could be a way to capitalize on the Reddit IPO before it happens and also gain exposure to the gaming sector.
Before going public, private companies often have smaller ways for investors to get exposure. Investors can get exposure to SpaceX and Twitter in several ways now.
TCEHY Price Action: Tencent shares closed at $48.39 on Wednesday, versus a 52-week trading range of $24.75 to $61.73.
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