Reddit is getting ready for its initial public offering (IPO) in March 2024. This is because the platform faces fierce competition from industry giants like TikTok and Facebook for advertising revenue.
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This IPO, if successful, would be the first debut of a social media company since Pinterest’s entry into the public market in 2019.
According to sources familiar with the matter, the company plans to make its public filing in late February, initiate in early March, and complete the IPO process by the end of the same month.
The San Francisco-based company, valued at approximately $10 billion in a funding round in 2021, is looking to sell around 10% of its shares during the IPO. The exact valuation will be decided closer to the listing date, considering market conditions.
While the IPO plans seem to be progressing, sources caution that Reddit’s history includes instances of delays, and the current plans could be subject to changes.
This IPO presents a test for Reddit, as it gauges the willingness of its user base to support the company’s stock market debut.
Reddit users have played role in various meme stock rallies, such as those of GameStop and AMC Entertainment Holdings.
Founded in 2005 by web developer Steve Huffman and entrepreneur Alexis Ohanian, the app gained popularity for its unique discussion groups and the democratic system of users voting up or down on posted content.
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The platform has yet to turn a profit. Reddit generates revenue primarily through advertising and offers premium access for $5.99 per month, allowing users to enjoy an ad-free experience and access exclusive features.
The company’s decision to delay its IPO until nearing profitability is contributed to market volatility experienced over the last two years.
The company faced challenges, with losses attributed to user engagement with advertising lagging behind other social media platforms.
CEO Steve Huffman acknowledged the losses in a Reddit post last June, attributing them to investments in the platform. Despite the losses, Reddit expected to become profitable soon.
The majority of revenue comes from advertising, and the company has set goals, such as surpassing $1 billion in ad revenue by 2023.
However, it fell short of this target. In an effort to boost revenue, the app announced plans to charge companies for access to its application programming interface (API), used by technology companies in training large-language models for artificial intelligence.
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The IPO comes at a time when social media platforms are facing intense competition for advertising dollars.
Industry giants like Meta Platforms and Snap have experienced stock surges, driven by a rally in technology stocks.
The global IPO has seen fluctuations, with market conditions playing a role in companies’ decisions to go public.
The last few years have seen bouts of market volatility that impacted IPO plans, and Reddit’s cautious approach with the trend of companies assessing market conditions before taking the plunge.
The success of Reddit’s IPO will also test the willingness of its user base to support the company’s stock market debut.
Reddit users have played a role in fueling meme stock rallies in the last three years, contributing to the surges in stocks like GameStop and AMC Entertainment Holdings.
Industry analysts have noted a rebound in large social media stocks over the past year, driven mainly by a rally in technology stocks as interest rates peaked.
Meta Platforms, the company behind Facebook, saw a threefold surge in shares over the past 12 months, while Snap experienced a 60% rise during the same period.
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