By Thaler
Social media platform Reddit is preparing to launch an initial public offering in March at a $10 billion valuation, moving forward with a listing it has been eyeing for more than three years, people familiar with the matter told Reuters.
Should the discussion site follow through with its long-awaited IPO, it would be the first time a major social media company joined the stock market since Pinterest debuted in 2019.
Reddit, which filed confidentially for its IPO in December 2021, is planning to make its public filing in late February, launch its roadshow in early March and complete the IPO by the end of March, two of the sources said.
The San Francisco-based company, which was valued at about $10 billion in a funding round in 2021, is seeking to sell about 10% of its shares in the IPO, the sources added.
It will decide on what IPO valuation it will pursue closer to the time of the listing, according to the sources.
Investors that stand to cash in on Reddit’s debut include Chinese multinational corporation Tencent, Silicon Valley-based venture capital funds Sequoia Capital and Andreessen Horowitz, as well as startup accelerator Y Combinator and financial services corporation Fidelity Investments.
Advance Publications, the parent company of publishing giant Condé Nast, also stands to receive a windfall from Reddit’s IPO, as the New York-based media company has an ownership stake in the social media site.
Reddit – which was co-founded in 2005 by prolific investor Alexis Ohanian and his college roommates at the University of Virginia, web developer Steve Huffman and Aaron Swartz – was quietly sold to Condé Nast the following year.
Ohanian – who’s now better-known as the husband of tennis icon Serena Williams – revealed at the time of the transaction that Condé Nast paid $10 million for the social media site.
By 2011, it was spun out into an independent entity under the Advance Publications umbrella, though the parent company is still reportedly the majority stakeholder.
“I thought I was getting away with something because for 16 months worth of work, I was getting more money than my parents had made their entire working lives,” Ohanian – whose net worth has been pegged by Forbes at $70 million – told CNBC back in 2020.
Ohanian has also made seed investments in other Silicon Valley darlings, such as Instacart, HR management company Zenefits, real estate firm Opendoor and autonomous car company Cruise.
In the years since, Reddit has become best known for its niche discussion groups and its users voting “up” or “down” on the content posted by other members.
The company primarily generates its revenue through advertising.
In April, Reddit rolled out a $5.99-per-month subscription price for users to access premium content, though the initiative has yet to turn a profit, Huffman revealed in a Reddit post.
It has also attempted to raise more money by charging companies for access to its application programming interface (API), which is used by technology companies to train large-language models used in artificial intelligence.
The move upset some users who rely on third-party apps to access Reddit, and nearly 8,000 subreddit forms went dark for 48 hours in protest of the new pricing policy.
Moderators – who work as unpaid volunteers for Reddit, doing tasks such as setting community rules and enduring threads remain on topic – said at the time that they wanted Reddit admins to realize how much they rely on “mods” to run the site, and will catch their attention by harming the site’s traffic.
The company has held back from pulling the IPO trigger in the past until it came closer to profitability. Bouts of market volatility that shut down the IPO market for much of the last two years also contributed to it delaying its plans.
But in 2023, Reddit expected to generate slightly over $800 million in advertising revenue, up more than 20% from a year earlier, The Information reported last month.
Sources familiar with the IPO discussions cautioned that Reddit’s debut plans could be pushed back, as has happened in the past, and asked not to be identified discussing confidential deliberations.
Reddit has attributed previous losses to investing in the platform, and the fact that its users engage less with advertising on its site than other social media.
It has also become popular for fueling dozens of “meme stock” rallies.
Perhaps the most infamous so-called meme stock was GameStop – the subject of the recently-released “Dumb Money” film, which detailed how the rumors of the video-game retailer on Reddit’s r/WallStreetBets discussion thread helped make the video-game retailer among the most widely-shorted US companies.
AMC Entertainment shares also soared on a meme stock rally boosted by the same forum on Reddit, where users shared countless posts cheering the movie theater chain when its stock finished up more than 100% in mid-2021.
