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Reddit IPO: Revenue Up, $91M Loss, Star Power Investors

Reddit's IPO Documents Show Rising Revenue, $91 Million Loss, and Prominent Stockholders

In its initial public offering (IPO) filing, social networking platform Reddit said on Thursday that its net loss shrank to $90.8 million and revenue increased by almost 21% in 2023. The announcement came as Reddit prepared for its highly anticipated planned U.S. stock market debut in March.

The IPO filing is a big step for Reddit, which has been around for nearly 20 years but hasn’t been as financially successful as Facebook and Twitter (now called X) in comparison to its social media contemporaries.

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Reddit reported 73.1 million daily and 267.5 million weekly users in the three months ending December 31, 2023. Their platform had 100,000 active communities and 1 billion posts, the company said.

According to the IPO filing, Reddit reported a $90.8 million net loss and $804 million sales rise from $666.7 million in the fiscal year ending December 31.

Google Pays Big Bucks for Reddit’s Data to Boost AI Models

From San Francisco According to Reuters’ Wednesday story citing sources, Reddit has agreed to share its material with Alphabet’s Google to train AI models. One source estimated the contract’s annual value at $60 million.

In its initial public offering (IPO) prospectus, Reddit disclosed that OpenAI CEO Sam Altman holds an 8.7 percent interest, making him the third-largest shareholder, according to Bloomberg.

The company did not disclose its IPO share price in its S-1 filing with the SEC. Bloomberg says it wants $5 billion. Altman would hold around $435 million with 789,456 Class A and 11.4 million supervoting Class B shares.

A 2021 funding round valued Reddit at $10 billion, but its share sale in the next weeks has unknown aims. Reuters says it will sell 10% of its shares in the IPO.

Reddit CEO Steven Huffman can issue Class B common shares if the firm hits a $5 billion market cap after the sale, according to IPO filings.

Reportedly, the social media company is anticipated to reach the valuation objective right away.

Potential for Future Growth

Reddit has fewer users than Meta (the corporation behind Facebook) and Twitter, despite sharing its age. Reddit has had a hard time making money from its platform, thus its growth statistics are significantly lower than its larger social media competitors.

The company’s content filtering and ads have been issues. Ad revenue is already aggressively contested by Facebook and TikTok.

But Reddit has won over a dedicated following of users. Its discussion boards have been the engine that has propelled multiple “meme-stock” rallies in recent years. The most notable of these was in 2021 when retail traders banded together to cause a stock price explosion for heavily shorted businesses including AMC Entertainment Holdings and GameStop.

Renowned investors including Tencent Holdings and Andreessen Horowitz have sponsored Reddit. In 2005, web engineer Steve Huffman and Serena Williams’ husband Alexis Ohanian developed it. Rapper Snoop Dogg funds the business.

The popularity of Reddit’s specialized discussion groups and the ability to “up” or “down” shared content has increased after its 2011 separation from Conde Nast.

Its acquisition of Dubsmash, a rival to TikTok, in 2020 was one of its recent attempts to rebrand itself as more appealing to younger consumers.

According to a Reddit post by Huffman in June of last year, the business, which relies on advertising and provides premium access, has not yet achieved profitability.

Its covertly filed U.S. IPO in late 2021 was delayed due to weak technology equities and the bad economy.

Morgan Stanley and Goldman Sachs are Reddit’s primary underwriters, along with over a dozen additional institutions.

About Emerson Hardy-Blue

Emerson Hardy-Blue is a prolific author specializing in the world of entrepreneurs and founders. With a deep passion for business and innovation, he delves into the journeys, challenges, and triumphs of visionary individuals. Emerson's writings provide invaluable insights and practical advice for aspiring entrepreneurs, offering a roadmap to success. Through his engaging storytelling and expertise, he inspires and empowers readers to pursue their entrepreneurial dreams with confidence and determination.