Community-focused message board site Reddit filed to go public on Thursday, marking the first major social media company to debut on the stock market in years and paving the way for private companies after an initial public drought. offering
A The prospectus provides, Reddit revealed its financial performance in preparation for selling shares to investors. The San Francisco-based company reported a more than 20 percent rise in revenue last year as its losses narrowed. It has 73 million daily users and over 100,000 active communities.
The prospectus initiates a process in the stock market where the 18-year-old company meets potential investors to pique their interest in buying its shares. Reddit may go public on the New York Stock Exchange in a few weeks under the ticker symbol RDDT. The company is valued at more than $10 billion in 2021 private funding.
Reddit is the last of the previous generation of social media companies to target the stock market after Facebook's high-profile offering. 2012, Twitter's in 2013 and Snap's in 2017. Over the years, the social media industry has changed, facing scrutiny for misinformation, hate speech and other consequences. Some companies have changed direction; Facebook was renamed Meta, and Twitter was bought by Elon Musk, who took the company private in 2022 and renamed it X.
Reddit's move is highly anticipated after its initial public offering faltered. According to data compiled by Renaissance Capital, 108 companies went public in the U.S. last year, a quarter of the number that will debut in 2021. Last year's biggest tech offerings were chip designer Arm and grocery delivery company Instacart.
“We are going public to advance our mission and become a stronger company,” Steve Huffman, Reddit's chief executive, said in a founder's letter included in the prospectus. “We believe that going public will also provide meaningful benefits to our community. Our users have a deep say in the communities they create on Reddit.
Mr. Huffman added. Reddit said it would allocate a portion of its shares at the IPO price to 75,000 of the company's most active users if they wanted to buy them.
In its prospectus, Reddit projected revenue of $804 million in 2023, up 21 percent from $666 million a year earlier. The company lost $90 million in 2023, compared with a loss of $158 million a year earlier, according to the prospectus.
Advance Magazine Publishers, some of its largest shareholders, Tencent Cloud Europe, Wy Capital, Fidelity Management and Sam Altman, former Reddit board member and chief executive of OpenAI.
Reddit's road to the public markets has been long and rocky. In 2005 in the University of Virginia dorm room, Mr. Founded by Huffman and Alexis Ohanian, the site began as a place for anonymous users to come together and discuss anything from popular TV shows to guitars to makeup and power washers.
The site was unique in that it focused mostly on anonymous communities, all of which were managed by volunteers who self-managed their forums or “subreddits” based on their own rules. It became known for “AMAs,” otherwise known as “Ask Me Anything” sessions, sometimes with public figures such as former President Barack Obama, Microsoft's Bill Gates, and actor Nicolas Cage.
The company has raised hundreds of millions of dollars in funding over the years, including two funding rounds of $250 million and $410 million in 2021. Investors include Fidelity Investments, Andreessen Horowitz, Sequoia Capital and Tencent Holdings. Like other early social networking ventures, Reddit initially avoided serving ads and making money. Instead, it focuses on revenue streams from social ideas, such as a user-generated e-commerce system and rewards that users can buy from each other. Those ideas are still in play.
Reddit eventually adopted ads based on its topic-based communities. For example, brands like Laneige target ads to the forum Makeup Addiction, one of the most active subreddits where users discuss cosmetics and how to use them.
The platform has built a burgeoning data licensing business based on its massive conversational data, which has become increasingly important amid the frenzy over artificial intelligence. AI models are trained on files of such data, making them more powerful. On Thursday, Reddit announced a licensing deal with Google that used Reddit data to train and develop its AI systems.
“We expect our data advantage and intellectual property to be an important component in the training of future AI models,” said Mr. Huffman said in the letter. The company has several undisclosed license agreements to use its data and expects to earn more than $203 million over the next three years from those agreements.
The site has had its share of struggles. It faced controversy after controversy in its early years for disavowing moderate communities, including its role in spreading misinformation during the Boston Marathon bombings in 2013, and hosting racist and misogynistic content on some of its smaller subreddits. Last year, Reddit faced a user backlash after it changed some of its rules and restricted third-party developers from using the site's content without paying for it.
Reddit has reversed its moderate stance and updated and tightened its policies in recent years, making it more attractive to marketers to place ads across the site.
The company also had a revolving door of leaders in its first decade, with Mr. It was led by four chief executives before Huffman returned to lead the site in 2015.
It warned that Reddit faces challenges and potential risks as a public company, including large language models, underlying AI systems that can aggregate and aggregate the site's content, and allow users to browse Reddit without visiting the site or viewing ads.
The company may face difficulty in communicating with brands in a digital advertising market dominated by Meta and Google.
“Given the gap between its platform's capabilities and best-in-class, Reddit may face a tough challenge growing its ad business,” said Eric Seifert, an independent mobile analyst who closely tracks social media companies and advertising.
The company warned that it depends heavily on its community to manage the site, and that any future uprisings or departures could harm the site.
“We have a lot of opportunities and a lot to do,” Mr. Huffman said.
