Reddit Scheduled for Initial Public Offering on the Stock Market

Reddit, the online platform known for its rich and diverse array of communities, is set to go public with its IPO priced at $34 a share. This move brings the company to the high-stakes world of the stock market, where its performance will be closely watched. The IPO represents a significant test for Reddit, a platform that has experienced a nearly twenty-year history of consistent losses, management issues, and bouts of user discontent. However, there is significant interest in the company due to its broad user base that engages in a wide variety of discussions.

Detailed in regulatory disclosures, Reddit reported approximately 76 million users checking in across its 100,000 communities in December alone. This scale indicates the large, active audience that the service provides access to. For the IPO, Reddit has reserved up to 1.76 million out of a total 15.3 million shares for its users. The remaining shares are expected to be purchased primarily by mutual funds and other institutional investors. Reddit boasts some renowned supporters, including Sam Altman, the CEO of OpenAI, who is a significant shareholder.

Despite its substantial user base and support, Reddit possesses a market value of $6.4 billion, making it comparably small in relation to other tech companies established around the same time. Facebook, for example, launched 18 months prior to Reddit and now has a market value exceeding $1.2 trillion. Significant to Reddit’s financial performance is its track record of considerable losses, which have totaled $717 million since inception.

In recent filings for its IPO, Reddit attributed its sustained losses to its focus on exploring new methods of revenue generation. After selling the company to Conde Nast, Reddit shifted its focus towards advertising, which has significantly boosted its annual revenue. Despite these attempts, Reddit faced losses of $436 million from 2020 to 2023. However, the company is developing a strategy to increase ad sales and generate more revenue by licensing access to its content.

Despite these plans, Reddit’s history of leadership instability and controversies might deter potential investors. Co-founders Steve Huffman and Alexis Ohanian both left the company for a period before returning to leadership positions. Huffman, who is currently the CEO, returned to the company following a public backlash faced by the former CEO, Ellen Pao, in 2015. Addressing the trials faced by the company in a 2021 letter, Huffman stated, “We lived these challenges publicly and have the scars, learnings, and policy updates to prove it. Our history influences our future. There will undoubtedly be more challenges to come.” This public admission speaks to Reddit’s awareness of its tumultuous history as it steps onto the public market arena.