Reddit Aims for IPO in Second Half as Market’s Gears Quietly Turn

Reddit and ServiceTitan declined to comment; StockX and Cohesity didn't respond to requests for comment.

Companies that keep their confidential SEC filings current “can get to the market quicker versus companies that are withdrawing,” said Daniel Klausner, managing director and head of U.S. public equity capital markets advisory at investment bank Houlihan Lokey. “It’s expensive to keep filing every quarter with accountants and lawyers.” (He didn’t comment on specific companies.)

Still, public listings don’t appear imminent for any blockbuster venture-backed tech firms. Public markets investors and bankers say those firms haven’t taken the key step of meeting with investors to test the waters on their appetites to buy shares in an IPO. Tech firms will likely sell relatively smaller amounts of new shares to investors when they do go public, a way to help boost the stock’s price, bankers said.

Holding companies back is a much bleaker market for tech stocks over the past 15 months, with investors spooked by rising interest rates, a deteriorating ad market and Russia’s war in Ukraine. Companies raised just $5.8 billion in total through IPOs in the U.S. last year, by far the lowest in at least a decade and 96% less than the IPO boom of 2021, according to Dealogic.

Greg Chamberlain, JPMorgan’s head of U.S. technology, media and telecoms equity capital markets, said there has been “limited appetite for tech holders to buy” tech IPOs recently because of market troubles. But he sees some signs of hope.

“A great time to IPO is when the equity market finds a floor and is heading higher from those lows,” he said. “Once the market opens up, I think there’s a chance new issuance picks up quite fast.” He didn’t comment on specific companies’ plans.

One glimmer of hope for the IPO market is that four different companies raised at least $100 million each in public offerings last week, the most since fall 2021, according to Renaissance Capital. The most notable was Nextracker, a solar equipment firm, which sold more shares than it had planned to in its IPO and at a price above its targeted range. Today, the stock is trading around $31, up from its IPO price of $24.

None of those companies with substantial IPOs were software or internet firms, though, so they don’t necessarily represent barometers for tech. But “in the IPO market, success begets success,” Klausner of Houlihan Lokey said.

Companies eyeing listings are also looking for the Nasdaq index, which has risen 13% so far this year, to climb higher—in some cases another 20%—before wading into an IPO, said one tech executive. Volatility, which can wreak havoc on companies’ ability to accurately price an IPO, also needs to subside.

Even with those improvements, companies face the prospect of a so-called “down round IPO,” in which they go public at a valuation lower than the last round of private funding they raised.

Reddit would certainly face that prospect. The company, which counts Andreessen Horowitz and Sequoia Capital as backers after it was spun out of Condé Nast over a decade ago, raised its last round of funding at a $10 billion valuation in 2021. It filed confidentially to go public later that year and was reportedly hoping for a $15 billion valuation. The firm was on the precipice of going public in 2022 before hitting pause. Mutual fund giant Fidelity valued Reddit at $6.6 billion last year, The Information has reported.

"In the IPO market, success begets success," said Houlihan Lokey's Daniel Klausner.

Since December 2021, stocks of social media firms like Snap and Meta Platforms have fallen by roughly three-quarters and one-half, respectively, amid a slump in the digital ads market.

Reddit’s business is outperforming those of at least some of its social media peers, a person close to the company said. It has grown market share in its ads business, particularly as more marketers are eschewing Twitter, The Information reported earlier this month. But Reddit is still far away from profitability, the person said.

Prepping Behind the Scenes

One company that appears to be nearing an IPO is Rubrik, a cybersecurity firm backed by Greylock Partners and Khosla Ventures. The firm, which was valued at about $4 billion in 2021, plans to start meeting with investors in the coming weeks to gauge their interest. A Rubrik spokesperson declined to comment.

Meanwhile, Instacart executives regularly hold quarterly earnings calls with their private investors to prepare them for life as a public company, a person familiar with the matter said. The grocery-delivery firm was close to going public last year before abandoning those plans in the fourth quarter. It is widely expected to be eyeing the first potential market opening for a listing.

Another unprofitable firm preparing to go public is Navan, an Andreessen Horowitz–backed corporate software travel firm formerly known as TripActions. Navan executives recently told employees to prepare for a public listing as early as July. A Navan spokesperson said the firm hasn’t picked a date to go public.

As of a couple of months ago, the firm—which sells corporate travel booking and expense management software, mostly to tech firms—was burning cash, a person familiar with the matter said. Ariel Cohen, Navan’s chief executive, said the company plans to be profitable by the end of the year.

Navan will be trying to point to a striking comeback story of growing revenue after business travel halted during the height of the pandemic. The company grew its revenue from roughly $90 million to $300 million between its two most recent fiscal years, three people familiar with the matter said.

Thomas Tuscherer, Navan’s chief financial officer, told The Information he has been meeting with investment bankers in recent weeks to feel them out on the prospect of an IPO.

“I don’t think anyone has a crystal ball in terms of when the markets are exactly gonna open. I think there’s probably a consensus about Q3 and Q4” of this year, he said. “I think everyone’s waiting right now in terms of mutual funds, when they start investing again in tech. What I’ve been told is that they haven’t made that move.”