Advance Magazine Publishers Inc., a significant shareholder in Reddit Inc. (RDDT), is reportedly exploring the establishment of a credit facility by leveraging its equity stake in the social media platform. According to sources cited by Bloomberg, Advance plans to offer 7.8 million shares at a price range of $145.38 to $148.54 each, potentially valuing the stake at up to $1.2 billion. This pricing would represent a discount of up to 8% from Reddit’s closing price of $158.02 on Thursday.
In a strategic move to keep its ownership intact while securing the credit facility, Advance is also purchasing derivatives on these shares. This financial maneuver reflects a nuanced approach to asset management, aiming to maintain influence over Reddit while also accessing liquidity.
The market reacted to this news with Reddit’s shares dropping by more than 7% in premarket trading on Friday, following a double digits surge during the regular session on Thursday. The decision to explore financing options comes at a time when Reddit’s valuation has seen a dramatic increase, with its stock rising over 300% post-IPO in March, thanks in part to its role in AI model training which has attracted significant investor interest.
The report also said that the specifics of the transaction might still evolve, and no final commitments have been confirmed. This development follows another recent move by Tencent Holdings Ltd., which sold off nearly 655,000 shares of Reddit, generating $88.5 million, highlighting the fluid nature of investment strategies among Reddit’s shareholders.
Price Action: Reddit shares, which surged 16% during regular trading on Thursday, dropped 7.45% in premarket trading on Friday, currently sitting at $146.25.
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