Reddit Gears Up for IPO Launch in March
This IPO marks the first for a major social media company since Pinterest's debut in 2019.
Social media giant Reddit, the platform known for niche discussions, is gearing up for its Initial Public Offering (IPO)slated for March 2024, Reuters reported, citing an anonymous source familiar with the matter.[1]
This IPO marks the first for a major social media company since Pinterest's debut in 2019.
Reddit, like its competitors, is entering the public market at a time when the battle for advertising dollars is intensifying, with platforms such as TikTok and Facebook posing challenges.
The platform has been a ground for retail investors participating in various "meme" stock rallies over the past three years, notably with GameStop and AMC Entertainment Holdings.
The company plans to kick off its roadshow in early March, culminating in the completion of the IPO by the end of the same month.
Based in San Francisco, Reddit achieved a valuation of approximately $10 billion in a funding round conducted in 2021.
As part of its IPO strategy, the company is aiming to float around 10% of its shares, with the exact valuation to be determined closer to the listing date.
Known for its niche discussion groups, Reddit generates revenue primarily through advertising and offers premium access for a monthly fee. Despite its popularity, the platform has yet to turn a profit.
Reddit CEO Steve Huffman acknowledged the losses, attributing them to investments in the platform and lower user engagement with advertising compared to other social media.
The company held off on its IPO plans until it neared profitability, also navigating market volatility that disrupted IPOs in recent years.
The IPO move comes after Reddit expected to generate over $800 million in advertising revenue in 2023, reflecting a 20 percent increase from the previous year.
While the company looks to tap into its vast user base for financial gains, it introduced charges for accessing its application programming interface (API), causing discontent among users relying on third-party apps.
Reddit's ad business is expected to hit $800 million in revenue this year, though it falls short of an earlier $1 billion forecast.
The platform weathered controversies over charging major data users as generative AI gained momentum. The IPO buzz is growing as Reddit positions itself for the public stage.
The forum-style platform is refreshing its logo and pushing for ads. But how will its niche users respond to these alterations? The platform's initial appeal was rooted in genuine discussions, and now, with business ads on the rise, user sentiments may shift.