Reddit, a popular online platform, is set to go public as a stock on March 21.

This upcoming tech initial public offering (IPO) is highly anticipated and will likely serve as a crucial benchmark for other companies considering going public. It will also serve as a significant indicator for investment banks and may present an interesting opportunity for investors.

Reddit Goes Public

Oversubscription does not ensure a positive stock market debut, but it implies the business is positioned to at least hit its targeted price range of $31 to $34 per share when it lists the IPO in New York on Wednesday, sources said.

Reuters' sources stated the IPO marketing was ongoing but requested anonymity due to confidentiality. A Reddit rep declined comment.

After a $10 billion private funding round in 2021, Reddit has lowered its valuation projections. The company's IPO seeks $748 million.

Since 2005, Reddit has lost money every year and trailed behind competition like Meta Platforms' Facebook and Twitter, now known as X, despite its passionate subscribers.

Some advertisers have criticized Reddit's weak content filtering and niche user concentration. Reddit moderates forum material with user volunteers. 

In recent years, IPOs have become increasingly rare as companies have struggled with the impact of rising interest rates and difficult market conditions.

In March 2022, the Federal Reserve took decisive action by significantly increasing its benchmark interest rate to address the emerging inflationary pressures.

During the following months, there was a significant increase in the benchmark federal funds rate, leading to a decline in major stock market indexes. Additionally, newly listed publicly traded companies faced considerable challenges.

Due to the challenging circumstances, companies decided to delay their IPO plans until the situation improved, as it created an unfavorable environment.

Consulting firm PwC has reported that the previous two years have seen a significant decline in the number of IPOs. In stark contrast to the booming year of 2021, where a staggering 951 companies made their debut through IPO, the following two years witnessed a mere 175 companies going public.

In 2023, there were a few notable IPOs, despite the overall sluggishness of the year. In September, semiconductor designer Arm Holdings made its debut in the public market with a valuation of almost $55 billion.

Notable IPOs in the mix were Instacart with a valuation of $10 billion, Birkenstock at $7.5 billion, and Kenvue soaring at an impressive $41 billion. The upcoming IPO of Reddit is set to be valued at approximately $6.5 billion, serving as a significant indicator of market receptiveness towards new listings.

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Big Boost for Investment Banks

Investment bankers are optimistic about the potential for a strong rebound in IPOs in 2024.

Morgan Stanley (MS -0.81%) and Goldman Sachs (GS -0.36%) are collaborating with Reddit on its IPO and eagerly await the upcoming developments.

The investment banking revenue of Morgan Stanley has experienced a significant decline, with a decrease of 55% over the past two years.

Goldman Sachs has experienced a comparable decline, as its investment banking revenue has decreased by 56% in the span of two years.

These companies have successfully maneuvered through a challenging investment banking market by leveraging strong trading revenues and robust wealth management businesses.

Nevertheless, should the market sentiment shift towards embracing risk and initial public offerings demonstrate strong performance, these stocks may experience significant gains, according to The Motley Fool.

READ MORE: FTC Launches Probe Into Reddit's AI Data-Licensing Practices Ahead of IPO