18-1-2024 (SAN FRANCISCO) Social media giant Reddit is gearing up for its long-anticipated initial public offering (IPO) in March, a move that has been in the works for over three years, according to insiders familiar with the matter.
If successful, Reddit’s IPO would mark the first major social media company to go public since Pinterest’s debut in 2019. The timing is crucial, as Reddit and its counterparts are currently grappling with intense competition for advertising revenue from platforms such as TikTok and Facebook.
The IPO also presents an interesting test for Reddit, as the platform’s users have been influential in driving “meme” stock rallies, including notable instances involving GameStop and AMC Entertainment Holdings over the past three years.
Having filed confidentially for its IPO in December 2021, Reddit is planning to make its public filing in late February, initiate its roadshow in early March, and conclude the IPO by the end of March, according to sources. The San Francisco-based company, valued at around $10 billion in a 2021 funding round, aims to sell approximately 10 per cent of its shares during the IPO, with the final valuation to be determined closer to the listing date.
However, sources caution that Reddit’s IPO plans could face delays, as has occurred in the past, emphasizing the fluid nature of confidential deliberations.
A spokesperson for Reddit declined to provide any comments on the matter.
Founded in 2005 by web developer Steve Huffman and entrepreneur Alexis Ohanian, Reddit gained prominence for its specialized discussion groups and the unique user-driven voting system. While the company generates revenue primarily through advertising and offers premium access for $5.99 per month, it has yet to achieve profitability, as acknowledged by Huffman in a Reddit post last June.
Reddit’s losses have been attributed to platform investments and lower user engagement with advertising compared to other social media platforms. The decision to postpone the IPO until closer to profitability was influenced by market volatility that disrupted IPO plans in the past two years.
Last year, Reddit announced plans to charge companies for access to its application programming interface (API), used by tech firms for training large-language models in artificial intelligence. This move, however, faced criticism from users relying on third-party apps to access Reddit.
Despite challenges, Reddit is expected to report advertising revenue of slightly over $800 million in 2023, reflecting a more than 20 per cent increase from the previous year, as reported by The Information.
