Reddit, the renowned online discussion network, is preparing to make its New York Stock Exchange debut under the ticker symbol ‘RDDT.’ On Thursday, the social media network filed a prospectus with the Securities and Exchange Commission, which revealed its financial performance and ownership structure. The business announced plans to go public in March, the largest IPO by a major social network since Pinterest in 2019. According to Reuters, the business has not yet specified the number of shares it will offer or the price range, but it was valued at $10 billion in a capital round in 2021.
Why should US consumers invest in the IPO?
Reddit is one of the world’s most popular websites, with 267.5 million active weekly users, over 100,000 active communities, and 1 billion cumulative posts as of the end of 2023. The company reported a 21% increase in revenue to $367.6m in 2023 while narrowing its net loss to $90.8m from $158.6m in 2022.
The company’s US average revenue per user, or ARPU, was $3.42 in the fourth quarter of 2023, a 2% decrease year on year. The company ascribed the reduction to the COVID-19 pandemic’s impact on its advertising revenue and the expansion of its overseas user base, which has a lower ARPU.
Another unique aspect of Reddit’s IPO is that it will let some of its most active users to purchase stock in the sale. The company will distribute shares in a tiered system that rewards users who have “meaningfully contributed to Reddit community programs,” completed a certain number of moderator actions, and have a minimum “karma” score – the points awarded to users by others on the platform for posting content.
This is a unique opportunity for Reddit users to hold stock in the company they adore and help define its future. Reddit’s initial public offering might be a profitable investment for US consumers who believe in the platform’s potential and community.
What about the Reddit shareholders?
Advance Magazine Publishers is the company’s largest stakeholder, owning 30.1%, followed by Tencent, the Chinese internet powerhouse, which owns 11%.
The third-largest shareholder is Sam Altman, the founder and CEO of OpenAI, a research organization dedicated to developing artificial intelligence for human benefit. Altman owns 8.7% of the firm and controls 9.2% of its voting power.
Altman is a former president of Y Combinator, a business accelerator that backed Reddit in its early days, and stands to make millions from Reddit’s IPO. He has been investing in the company since 2014 when he led a $50m funding round that valued Reddit at $500m.
Reddit’s IPO will be a litmus test for its capacity to compete with other social media platforms like Facebook and Twitter, now known as X, which have greater user bases and more revenue. Reddit has a devoted and engaged membership, but it confronts issues such as filtering dangerous content, combating online harassment, and expanding its revenue streams.
One of the ways Reddit intends to accomplish this is by exploiting its data. In January 2024, the firm announced that it had entered into data licensing contracts worth $203 million. According to Reuters, one of its partners is Google, which plans to utilize Reddit material to train AI algorithms. According to one report, the arrangement is worth approximately $60 million every year.
Notably, Reddit has confidentially submitted its IPO filing in late 2021; however, challenging economic conditions and the underwhelming performance of listed technology stocks led to a postponement of the offering.
