Reddit seeks to launch IPO in March
Reddit, the widely popular social media platform, is gearing up for its initial public offering (IPO) in March, marking a significant move in the industry since Pinterest's debut in 2019. The IPO announcement comes at a crucial juncture for Reddit and its counterparts, as they grapple with fierce competition for advertising revenue from platforms like TikTok and Meta's Facebook.
This anticipated IPO will not only be a litmus test for Reddit's financial prospects but also a unique exploration of its user base's loyalty. Over the past few years, Reddit users have played a pivotal role in fueling "meme" stock rallies, from GameStop to AMC Entertainment Holdings. The willingness of these passionate investors to back Reddit's stock market debut adds an intriguing layer to the upcoming offering.
Having filed confidentially for its IPO in December 2021, Reddit is set to make its public filing in late February, initiate its roadshow in early March, and conclude the IPO by the end of March, according to sources. The San Francisco-based company, valued at approximately $10 billion in a 2021 funding round, plans to sell about 10% of its shares during the IPO, with the valuation decision pending closer to the listing date.
It's worth noting that the IPO timeline could be subject to changes, as witnessed in the past, and the sources discussing these confidential matters prefer to remain anonymous. A spokesperson for Reddit declined to comment on the speculation.
Founded in 2005 by Steve Huffman and Alexis Ohanian, Reddit has gained prominence for its diverse discussion groups and the unique "up" or "down" voting system. Despite generating revenue primarily through advertising and offering a premium subscription for $5.99 per month, Reddit has yet to turn a profit, as acknowledged by Huffman in a Reddit post last June.
The delay in Reddit's IPO was strategic, waiting for closer alignment with profitability. Market volatility over the past two years, which significantly impacted the IPO landscape, also contributed to the postponement of their plans.
As Reddit moves toward IPO readiness, recent reports suggest the platform is expected to generate over $800 million in advertising revenue in 2023, a notable increase of more than 20% from the previous year. The company's decision to charge for access to its application programming interface (API), utilized by tech companies for large-language model training, has stirred some controversy among users relying on third-party apps to access Reddit.
Against the backdrop of this IPO, the broader social media stock landscape has seen a resurgence in the past year. Driven by a rally in technology stocks amid peak interest rates, Meta Platforms, the operator of Facebook, has witnessed a threefold increase in its shares over the past 12 months, while Snap's shares rose by 60% during the same period.
In conclusion, Reddit's IPO journey in March is poised to be a pivotal moment in the social media realm. Navigating through competition, user sentiments, and the evolving advertising landscape, Reddit's debut on the public market will undoubtedly be closely watched by investors, industry enthusiasts, and its dedicated user community.