Reddit Prepares for Its Initial Public Offering (IPO)

Reddit, a popular online platform known for its diverse user communities, has entered the stock market with its Initial Public Offering (IPO) priced at $34 a share. The stock, listed as “RDDT” on the New York Stock Exchange, will test Reddit’s capacity to grow into a sustainable business despite its tumultuous 20-year history marked by continuing losses, leadership instabilities, and intermittent user revolts.

Reddit’s appeal lies predominantly in its vast userbase that regularly visits the platform to discuss a host of topics, from pop culture memes to serious life concerns, as well as seeking advice from like-minded individuals. According to pre-IPO mandatory disclosures, Reddit attracted approximately 76 million users in December who visited around 100,000 separate communities. As part of the IPO, Reddit reserved 1.76 million of 15.3 million shares for its platform users, with the remaining shares expected to be purchased primarily by mutual funds and institutional investors.

Its potential for revenue generation has won Reddit notable support, including from OpenAI CEO Sam Altman, who is now one of the largest shareholders owning 12.2 million shares, due to his early investment. Other early investors include PayPal co-founder, Peter Thiel, Academy Award-winning actor Jared Leto, and rapper Snoop Dogg; they, however, are not listed among the largest shareholders in the IPO.

Despite its popularity, Reddit remains fairly small in comparison to other tech companies of its age. Valued at $6.4 billion, it pales in comparison to Meta Platforms’ $1.2 trillion valuation. While Meta records an annual revenue of $135 billion, Reddit’s turnover is less than $1 billion. Compounding this financial standing is Reddit’s ongoing issue of having never achieved profitability. The company’s cumulative losses have grown to $717 million, a considerable leap from the $467 million reported in December 2021.

Reddit’s IPO filing outlined strategies to improve revenue and profits, including increasing ad sales, licensing access to its content (akin to the $60 million agreement with Google to train its AI models), and exploring ways to gain from the increasing volume of e-commerce transactions on its platform. However, Reddit’s history of leadership turbulence and ongoing losses may deter potential investors. The surprising return of co-founders Steve Huffman and Alexis Ohanian who left in 2009 – with Huffman now serving as CEO after a series of controversies – underscores the company’s unstable past.