Michelle ThompsonReddit, renowned for its active userbase and its role in shaping online discourse, has officially filed for its long-awaited initial public offering (IPO) on Thursday.
This move marks a significant step for Reddit, potentially making it the first major social media platform to go public since Snapchat in 2017. Notably, Reddit’s IPO will offer a unique opportunity for some of its dedicated users, with the company planning to reserve shares for top contributors based on their “karma,” a measure of user activity and reputation on the platform.
In a letter included in the IPO filing, co-founder and CEO Steve Huffman expressed the company’s desire for users to have a stake in Reddit’s ownership, highlighting the strong sense of community ownership prevalent on the platform.
Reddit’s decision to go public comes amidst a downturn in the broader IPO market, with hopes that its listing could inject new energy into dealmaking on Wall Street.
The San Francisco-based company intends to list on the New York Stock Exchange under the ticker symbol “RDDT,” as outlined in its filing with the Securities and Exchange Commission. This move follows years of preparation since Reddit appointed its first chief financial officer and began discussing the possibility of an IPO publicly.
Despite not yet being profitable, Reddit aims to expand its business through avenues such as advertising, enhancing e-commerce offerings, and leveraging its data for AI model training, according to Huffman.
Originally sold to media conglomerate Condé Nast in 2006, Reddit’s largest shareholders now include Advance Publications, the parent company of Condé Nast, with a 30.1% stake, Chinese tech firm Tencent with 11%, and OpenAI CEO Sam Altman with 8.7%, as per the IPO filing.
The origin story of the ‘Front Page of the Internet’.
Reddit, often dubbed as the “front page of the internet,” has a longstanding presence in social media. Established in 2005 by college roommates Huffman and Ohanian, coinciding with significant developments like TheFacebook rebranding to Facebook and YouTube’s inaugural video upload, predating the launch of Twitter (now referred to as X).
Over its 18-year tenure, Reddit has experienced substantial expansion, occasional controversies, and impactful events. Central to its appeal are the “subreddits,” user-driven discussion spaces covering a wide array of topics from sports to politics to religion and more. These forums facilitate anonymous discussions, encompassing everything from casual memes to significant news occurrences.
Steve Huffman, the CEO of Reddit, was present at the Variety & Reddit An Evening With Future Makers event held at Wynn Las Vegas on January 05, 2023, in Las Vegas, Nevada.
In 2021, Reddit made waves in the financial markets when a group of day traders on the platform, known as WallStreetBets, initiated a campaign to purchase shares of GameStop, aiming to squeeze hedge funds that had bet against the stock. Despite some participants experiencing significant losses, the event underscored the influence of Reddit communities. Following the WallStreetBets saga, Reddit secured a new funding round of $250 million, valuing the company at $6 billion. Additionally, it announced plans to double its workforce and expand internationally.
Reddit found itself in the spotlight once again earlier this year due to a widespread user protest. Thousands of the platform’s most popular subreddits went dark for weeks in response to a proposed fee structure that would have required some third-party apps to pay millions of dollars to maintain access to Reddit. The protest eventually subsided after Reddit threatened to remove forum moderators if they continued the blackout.
Reddit users will have the opportunity to become shareholders.
Thursday’s filing provides a comprehensive overview of Reddit’s business strategy, aiming to diversify beyond the traditional ad-supported model predominant in most social platforms.
According to the filing, Reddit saw an increase in its daily active users, averaging over 73 million in the last quarter of 2023 compared to 52 million reported in 2021. The platform also boasted hosting more than 100,000 active communities by December 2023.
In terms of financial performance, Reddit’s sales in 2023 reached $804 million, marking a 21% increase from $666.7 million in 2022. Despite this growth, the company reported a net loss of $90.8 million in 2023, though narrower than the $158.6 million loss in 2022.
While Reddit anticipates a growing advertising market, projecting a total addressable market of $1.4 trillion by 2027, it acknowledges the challenge of achieving profitability, citing a history of net losses.
To bolster revenue, Reddit plans to leverage data sales to AI firms and focus on the “user economy.” This includes initiatives like the Reddit Contributor Program and Reddit Collectible Avatars Creators Programs, allowing users to earn rewards, with Reddit taking a portion of these earnings.
Additionally, Reddit announced an expanded partnership with Google, granting access to Reddit’s data for training Google’s AI models and enhancing Reddit content visibility across Google platforms.
Emily Martinez
