SAN FRANCISCO (AP) : Social media platform Reddit and its eclectic bazaar of online communities are ready to plumb high-stakes territory – the stock market – as it enters a new era on Thursday as a publicly traded company with a market value estimated at $6.4 billion.
The company said Wednesday that it had priced its IPO at $34 a share. Shares will begin trading today on the New York Stock Exchange (NYSE) under the ticker symbol “RDDT,” a market debut likely to spur a flurry of commentary on Reddit’s platform and competing social media outlets.
The IPO will test the quirky company’s ability to overcome a nearly 20-year history colored by uninterrupted losses, management turmoil and occasional user backlashes to build a sustainable business.
The interest surrounding Reddit stems largely from a large audience that religiously visits the service to discuss a potpourri of subjects, ranging from silly memes to existential worries, and get recommendations from like-minded people.
About 76 million users checked into one of Reddit’s roughly 100,000 communities in December, according to the regulatory disclosures required before the San Francisco company goes public.
Reddit set aside up to 1.76 million of the 15.3 million shares being offered in the IPO for users of its service. Per the usual IPO custom, the remaining shares are expected to be bought primarily by mutual funds and other institutional investors betting Reddit is ready for prime time in finance.
Reddit’s money-making potential has also attracted some prominent supporters, including OpenAI CEO Sam Altman. As an early investor, Altman accumulated a stake that has made him one of the company’s biggest shareholders. According to the company’s IPO disclosures, Altman owns 12.2 million shares of Reddit stock.
Other early investors in Reddit have included PayPal co-founder Peter Thiel, Academy Award-winning actor Jared Leto and rapper Snoop Dogg. None of them are listed among Reddit’s largest shareholders heading into the IPO.
By the tech industry’s standards, Reddit remains extraordinarily small for a company that has been around as long as it has.
With its stock priced at $34 per share, Reddit will have a market value of $6.4 billion. Meanwhile, Meta Platforms – the biggest social media service, Facebook, was started just 18 months earlier than Reddit – boasts a market value of more than $1.2 trillion. Meta also generates an annual revenue of $135 billion, while Reddit’s revenue remains below $1 billion.
And then there is this problem: Reddit has never profited from its broad reach while piling up cumulative losses of $717 million. That number swelled from $467 million in December 2021, when the company first filed papers to go public, before aborting that attempt.
In the recent documents filed for its revived IPO, Reddit attributed the losses to a fairly recent focus on finding new ways to boost revenue.
Not long after its birth, Reddit was sold to magazine publisher Conde Nast for $10 million, a deal that meant the company no longer needed to operate as a standalone business.
Even after Conde Nast parent Advance Magazine Publishers spun off Reddit in 2011, the company said in its IPO filing that it didn’t begin to focus on generating revenue until 2018. Those efforts, mostly centered around selling ads, have helped the social platform increase its annual revenue from $229 million in 2020 to $804 million last year. However, the San Francisco-based company also posted combined losses of $436 million from 2020 through 2023.
Reddit outlined a strategy in its filing calling for even more ad sales on a service that it believes companies will be a powerful marketing magnet because so many people search for product recommendations there.
The company also hopes to earn more money by licensing access to its content in deals similar to the $60 million that Google recently spent to train its artificial intelligence models. That ambition, though, faced an almost immediate challenge when the U.S. Federal Trade Commission opened an inquiry into the arrangement.
The increasing amount of e-commerce transactions on the platform has also led Reddit’s management to explore ways to get a piece of the action, according to its IPO filing. “We believe that over time, we can generate revenue based on the volume of commerce that is conducted on Reddit,” the company said in the documents without elaborating on how that might be accomplished.
Reddit also experienced tumultuous bouts of instability in leadership that may scare off some prospective 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 how he got the job reminds us how messy things can get at Reddit. The change in command occurred in 2015 after Ellen Pao resigned as CEO amid a nasty user backlash to banning several communities and firing Reddit’s talent director. Even though Ohanian said he was primarily responsible for the firing and the bans, Pao was hit with most of the user ire, paving the way for Huffman to run the company again.
Although his founder’s letter leading up to this IPO didn’t mention it, Huffman touched upon the company’s past turmoil in another missive included in 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’ve faced,” Huffman wrote in 2021. “We lived these challenges publicly and have the scars, learnings and policy updates to prove it. Our history influences our future. There will undoubtedly be more challenges to come.”
