Reddit, the self-anointed the ‘front page of the internet,’ set to make its stock market debut
SAN FRANCISCO– Reddit and its eclectic bazaar of online communities are ready to explore high-stakes territory: the stock market.
The company said Wednesday it had priced its initial public offering at $34 per share. The shares will begin trading today on the New York Stock Exchange under the ticker symbol “RDDT” in a market debut that will likely lead to a flurry of commentary on Reddit’s own platform, as well as on rival social media.
The IPO will test the idiosyncratic company’s ability to overcome a nearly 20-year history tainted by uninterrupted losses, management turmoil and occasional user backlash and build a sustainable business.
The interest surrounding Reddit largely stems from a large audience that visits the service religiously to discuss a potpourri of topics ranging from silly memes to existential concerns, and to get recommendations from like-minded people.
About 76 million users checked into one of Reddit’s roughly 100,000 communities in December, according to regulatory disclosures required before the San Francisco company goes public. Reddit reserved up to 1.76 million of the 15.3 million shares offered in the IPO for users of its service. In typical IPO parlance, the remaining shares are expected to be bought primarily by mutual funds and other institutional investors, who are betting that Reddit is ready for prime time in the financial world.
Reddit’s money-making potential has also attracted some prominent supporters, including OpenAI CEO Sam Altman, who as an early investor amassed a stake that made him one of the company’s largest shareholders. According to the company’s IPO, Altman owns 12.2 million shares of Reddit.
Other early investors in Reddit include PayPal co-founder Peter Thiel, Academy Award-winning actor Jared Leto and rapper Snoop Dogg. None of them are among Reddit’s largest shareholders heading into the IPO.
By tech industry standards, Reddit remains extremely small for a company that has been around for so long.
At $34 per share, Reddit will have a market value of $6.4 billion. Meanwhile, Meta Platforms – the largest social media service Facebook, just 18 months ahead of Reddit – has a market value of more than $1.2 trillion. Meta also generates annual revenue of $135 billion, while Reddit’s remains under $1 billion.
And then there’s this problem: Reddit never capitalized on its broad reach while piling up cumulative losses of $717 million. That number has increased due to cumulative losses of $467 million in December 2021, when the company first filed papers to go public before abandoning that attempt.
In recent filings for its re-IPO, Reddit attributes the losses to a fairly recent focus on finding new ways to increase revenue.
Not long after its birth, Reddit was sold to magazine publisher Conde Nast for a $10 million deal, meaning the company didn’t have to operate as a standalone company. Even after Conde Nast parent company Advance Magazine Publishers spun off Reddit in 2011, the company said in its IPO filing that it only began focusing on monetization in 2018. These efforts, which were mainly focused on selling ads, have helped the social platform grow. annual revenue from $229 million in 2020 to $804 million last year. But the San Francisco-based company also posted a combined loss of $436 million between 2020 and 2023.
Reddit outlined a strategy in its filing calling for even more ad sales for a service that the company believes will be a powerful marketing magnet for businesses because so many people look there for product recommendations.
The company also hopes to raise more money by licensing access to its content in deals similar to the $60 million Google recently secured to help train its artificial intelligence models. However, that ambition was put to the test almost immediately when the US Federal Trade Commission opened an investigation into the scheme.
The increasing number of e-commerce transactions on the platform also has Reddit management exploring ways to get a piece of the action, the IPO filing shows. “We believe we can generate revenue over time based on the trading volume executed on Reddit,” the company said in the documents, without explaining how that could be achieved.
Reddit has also experienced tumultuous periods of leadership instability that may deter some potential investors. Company co-founders Steve Huffman and Alexis Ohanian – also the husband of tennis superstar Serena Williams – both left Reddit in 2009 while Conde Nast was still in control, only to return years later.
Huffman, 40, is now CEO, but the way he got the job is a reminder of how messy things can get at Reddit. The change in command took place in 2015 after Ellen Pao stepped down as CEO amid a nasty user backlash over the banning of several communities and the firing of Reddit’s talent director. Although Ohanian said he was primarily responsible for the firing and bans, Pao bore the brunt of the users’ anger, paving the way for Huffman to lead the company again.
While the letter from its founder that preceded this IPO didn’t mention it, Huffman addressed the company’s past turmoil in another post that was part of a December 2021 filing attempt that was subsequently canceled.
“The list of our mistakes over the years is long, and so is the list of challenges we have faced,” Huffman wrote in 2021. “We have lived these challenges publicly and have shared the scars, the lessons and policy updates to prove this. Our history influences our future. There will undoubtedly be more challenges to come.”