By
Steve Muchoki
April 26th, 2024
In the filing, Reddit also mentioned its intention to offer shares to some of its most active users.
Reddit has finally filed with the United States Securities and Exchange Commission (SEC) for its highly anticipated stock market debut, with plans to launch the largest initial public offering (IPO) by a major social network after years of speculation.
The offering would be the biggest social media IPO since Pinterest went public in April 2019.
Reddit to Go Public in March
On February 22, 2024, Reddit, launched over two decades ago, filed the S-1 filing revealing key financial details and its intentions for the IPO. According to the filing, Sam Altman, the founder and CEO of OpenAI, is the company’s third-largest shareholder, holding an 8.7% stake in the firm.
The social media platform plans to trade on the New York Stock Exchange under the ticker symbol “RDDT”, with the IPO expected to take place in March.
In the filing, Reddit said it is yet to determine the number of shares it intends to offer as well as the price range of the shares to be sold.
Investors had previously advised the company to aim for a valuation no less than $5 billion in a closed-door meeting in January; however, it remains to be seen how much the firm will finally target for the upcoming IPO next month.
While the IPO valuation is yet to be determined, Reddit disclosed in the filing with the SEC that it sustained losses of $90.8 million in 2023, down from $158.6 million in 2022, as its revenue grew by roughly 21%.
Reddit’s IPO filing also revealed its revenue streams, including data licensing agreements. In January 2024, the company entered into data licensing arrangements with an aggregate contract value of $203 million, including a partnership with Google worth approximately $60 million annually to train its AI models.
The company has appointed Morgan Stanley and Goldman Sachs as the lead underwriters for its IPO, with over a dozen other banks participating in the offering.
Reddit to Allow Users to Participate in IPO
In the filing, Reddit also mentioned its intention to offer shares to some of its most active users. The company plans to use a tiered system to allocate shares to users who have made significant contributions to Reddit community programs, completed a specified number of moderator actions, and achieved a minimum “karma” score – a metric that indicates user engagement and contribution.
The company said that its users have a strong sense of ownership over the communities they create and manage. They also desire the firm to be as “amazing as possible”, which is why it has decided to allow them to participate in the IPO.
“We want this sense of ownership to be reflected in real ownership – for our users to be our owners. Becoming a public company makes this possible. With this in mind, we are excited to invite the users and moderators who have contributed to Reddit to buy shares in our IPO, alongside our investors,” the filing said.
The platform boasts 267.5 million active weekly users, over 100,000 active communities, and 1 billion total posts.
Meanwhile, despite Reddit’s innovative approach, the company still faces challenges in monetizing its platform compared to social media giants like Facebook and Twitter. The upcoming IPO will be a significant milestone for the social media platform, providing an opportunity to enhance its commercial success and compete more effectively in the industry.
