In a long-awaited initial public offering (IPO), Reddit hopes to raise $748 million
CEO Steven Huffman explained in a letter included in the filing that Reddit has plenty of opportunities for growth and expansion, with advertising being the primary focus
Reddit, the renowned social media giant, is preparing for a substantial initial public offering (IPO), with a fundraising goal of approximately $748 million. The company intends to offer 22 million shares, each priced between $31 and $34, aiming for a market capitalization of nearly $6.5 billion. Notably, Reddit has set aside 1.76 million shares for its early users and moderators, with no lockup period.
The Path to Public Listing
From its confidential filing in 2021, Reddit’s journey to public listing has seen its share of market volatility. At that time, US exchanges witnessed a record-breaking $339 billion in IPOs, and Reddit was estimated to be worth $10 billion, potentially reaching $15 billion in an IPO. However, US IPOs saw a significant decline last year, amounting to just $26 billion. By the fourth quarter, Reddit boasted an average of 73.1 million daily unique visitors.
Financial Overview
Regarding financial performance, Reddit reported a net loss of $91 million on revenues of $804 million in 2023, an improvement from a net loss of roughly $159 million on revenues of $667 million the previous year. Advance Magazine Publishers Inc., a part of the Newhouse family publishing empire that owns Conde Nast, is Reddit’s largest shareholder. Advertising forms the bulk of Reddit’s revenues, but audience targeting is becoming increasingly challenging due to passive users and irregular engagement patterns. Many users interact with Reddit without logging in.
Reddit has a large user base and community of moderators which is both an advantage and a challenge. Throughout its history, the platform has faced a lot of protests and backlash from its users regarding various issues. The fact that Reddit relies on 60,000 volunteer moderators is seen as a significant risk by investors. However, CEO Steven Huffman explained in a letter included in the filing that Reddit has plenty of opportunities for growth and expansion, with advertising being the primary focus.
Reddit is in the preliminary stages of permitting third parties to license its data, which includes training AI models. However, its apprehensions about API pricing have upset third-party apps. In January, the company entered into data licensing agreements worth a combined $203 million. Key shareholders of Reddit include COO Jennifer Wong, FMR LLC, and entities affiliated with OpenAI CEO Sam Altman, Tencent Holdings Ltd., Vy Capital, Quiet Capital, and Tacit Capital.
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