Reddit goes public – what you should know about its IPO

Reddit has officially filed for an initial public offering (IPO) on the US stock market.

Reddit goes public – what you should know about its IPO
Reddit logo is seen in this illustration taken November 7, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

The backstory: Reddit, founded almost 20 years ago by Steve Huffman and Alexis Ohanian, kicked off as a platform where users could dive into all sorts of content based on what others shared and upvoted. Over time, it became a massive social media hub where discussions, news and entertainment thrive. 

Initially part of Conde Nast's umbrella in 2006, Reddit became its own entity under Advance Publications in 2011. It really hit the spotlight during the meme-stock craze, especially with the infamous WallStreetBets forum, which shook up the stock market. Reddit has dipped its toes into cryptocurrencies like bitcoin and ether and even ventured into virtual goods sales using ether and MATIC. 

More recently: Despite its popularity, Reddit has had its fair share of financial ups and downs. In 2023, it saw a US$90.8 million loss despite raking in US$804 million in revenue, although that was better compared to a US$158.6 million loss the year before with US$666.7 million in revenue.

The development: Reddit has officially filed for an initial public offering (IPO) on the US stock market. This move has been in the works for over two years, and it's expected to be one of the year's biggest IPOs. According to the filing, Reddit has been pulling in an average of 73.1 million daily active visitors in the last quarter. While the exact value of the IPO is still under wraps, it's reportedly around US$5 billion or more.

What's really catching people's attention is Reddit's plan to set aside shares for users and moderators who were onboard before January 1, giving them a slice of the pie right from the get-go. Reddit will select eligible users based on their "Karma," the platform's term for a user's reputation score based on their community contributions. Plus, this IPO would be the first time a social media company went public since Pinterest in 2019. 

In another announcement, Reddit shared a partnership with Alphabet's Google. This collaboration means Google's artificial intelligence (AI) products will tap into Reddit's user-generated content for tech improvements. 

Key comments:

"Advertising is our first business and advertisers of all sizes have discovered that Reddit is a great place to find high-intent customers that they aren't able to reach elsewhere," said Reddit co-founder and CEO Steven Huffman. "Advertising on Reddit is rapidly evolving and we are still in the early phases of growing this business."

"I have never been more excited about Reddit's future than I am right now," said Huffman in a note to prospective investors. "We have many opportunities to grow both the platform and the business, the latter through advertising, monetizing commerce on the platform and licensing data."

"It's clear that sophisticated investors won't be excited about buying into the public debut, likely explaining why Reddit will be offering shares to their users, to have stock supporters and get fans to prevent a negative meme stock phenomenon," said Greg Martin, co-founder of Rainmaker Securities.