The Reddit IPO: What to Know

Reddit is expected to IPO soon. If you want to buy Reddit stock, you'll need a brokerage account to do so.
Alana Benson
By Alana Benson 
Updated
Edited by Chris Davis

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Nerdy takeaways
  • Reddit filed to go public on Thursday, Feb. 22.

  • Reddit will trade on the NYSE under the ticker "RDDT."

  • According to the WSJ, Reddit plans to reserve shares for 75,000 top users to buy stock at the IPO price.

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If you’ve ever tried to crowdsource an answer to an obscure question or find cool stuff to do in a random city, you’re probably familiar with Reddit. The internet forum may feel reminiscent of a ‘90’s chatroom, but the site has a strong internet presence, an influential base of users (GameStop, ever heard of it?), and now, a path to becoming a public company.

In 2021, Reddit announced it had confidentially filed its IPO paperwork with the Securities and Exchange Commission (SEC), but it held off on actually going public.

Now, Reddit has filed its IPO prospectus with the SEC, picked out a ticker ("RDDT") and chosen a future home: The New York Stock Exchange. And according to reporting by CNBC, Reddit is seeking a valuation of up to $6.5 billion.

According to a letter from Reddit co-founder Steve Huffman in the IPO prospectus, more than 76 million people, on average, visited Reddit every day in December 2023.

United States Securities and Exchange Commission. FORM S-1 REGISTRATION STATEMENT. Accessed Feb 22, 2024.

While it's still unknown exactly when Reddit will go public, if you want to be ready to buy Reddit stock once it hits the market, here’s what you need to know.

How to buy Reddit stock

According to the Wall Street Journal, if you're a Reddit super user, you could potentially be one of 75,000 people who will be given the opportunity to purchase Reddit stock at the IPO price.

But if you're not one of the chosen 75,000, you'll have to wait a little longer.

Once Reddit has gone public, you’ll be able to buy Reddit stock. If you want to invest in Reddit as an individual stock when it becomes available, you’ll need an investment account. Investment accounts, or brokerage accounts, are not investments themselves — they simply house the money you use to buy investments, and your actual investments once you purchase them. There are several types of investment accounts, and it’s worth investigating which type is best for you since some offer tax advantages.

Once you open an investment account and add money to it — and Reddit goes public — you’ll be able to buy the stock.

That being said, some brokers do offer access to IPO shares before they're more widely available, but they may have mandatory investor assessments, account minimums or trade minimums.

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Should you buy Reddit stock?

Once the stock becomes available, there are a few different things to consider before deciding to buy its stock.

While Reddit serves a slightly different function in a different format than its competitors (think more question-and-answer and in-depth discussion than Instagram pics and platitudes), the company is still entering a ring that already has a few heavyweight champs in it.

With competition such as Meta, TikTok and Pinterest, it may be difficult for Reddit to hold its own. Plus, according to reporting from Bloomberg, the company has yet to turn a full-year profit

. Reddit relies on two main income streams: Advertising revenue, and a paid plan called Reddit Premium lets users pay $5.99 per month to avoid that advertising. Both sources of revenue were met with protest from Reddit users when they were introduced.

That being said, there's nothing out there that's quite like Reddit. In the IPO paperwork, Huffman cited the role Reddit can play in peoples' lives.

"Whatever people are into or going through, it is on Reddit. I am particularly proud of the role Reddit plays in providing support to people during pivotal life moments when turning to friends and family may not be an option. Somebody might visit r/Parenting for help when they’re having trouble with a child, or go to r/lgbt for advice about coming out, or they might turn to r/stopdrinking for help quitting drinking, as I did more than four years ago," said Huffman.

When purchasing any stock you’ll want to consider the company's fundamentals, such as its revenue, net income and earnings per share. When looking into a company that is new to the public sphere, such as Reddit, it can be difficult to find that information since private companies don’t have to produce regular reports. Once Reddit becomes public, that information will be more readily available because the company will be required by the SEC to provide regular financial updates.

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How much should you invest in Reddit stock?

No one will know how much a share of Reddit stock will cost until its IPO price is announced, and even then, the market will have its say about the company’s value. But like any large or significant purchase, it’s a good idea to know how much you feel comfortable spending before you hit “buy.”

A good rule of thumb is to not invest more than 5% to 10% of your overall investment portfolio (that includes all your investment accounts, such as a 401(k), an IRA and any traditional brokerage accounts) in individual stocks. For easy math, that means if you have $100 to invest, you may only want between $5 and $10 to be allocated to individual stocks such as Reddit.

The rest of your account could be made up of funds, such as index funds. Funds offer instant diversification for your portfolio since they invest in lots of companies at once. That way, if one company performs poorly, your overall portfolio is bolstered by the performance of the other companies.

Once Reddit IPOs and is a publicly-traded company, you can decide how much you want to spend on its stock. If you open an investment account with a broker that offers fractional shares, you’ll be able to pay for your stock in a dollar amount rather than a share amount. That means if the price per share is more than you want to spend, you can purchase a fraction of a share rather than a full share.

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