Social media giant Reddit is gearing up for its long-awaited initial public offering (IPO), with plans to debut in March, insiders have revealed. This move comes after more than three years of contemplation and positions Reddit for the first major social media IPO since Pinterest’s entry into the market in 2019. The impending IPO comes in a competitive landscape where platforms like TikTok and Facebook compete for advertising dominance.
The IPO not only marks a pivotal moment for Reddit, but also tests the loyalty of its user base by supporting the company’s stock market debut. Reddit users have been instrumental in fueling several “meme” stock rallies, including those of GameStop and AMC Entertainment Holdings over the past three years.
Having confidentially filed its IPO in December 2021, Reddit plans to make its public filing in late February, kick off its roadshow in early March, and conclude the IPO by the end of March, according to reliable sources. The San Francisco-based company, valued at approximately $10 billion in a 2021 funding round, intends to offer about 10% of its shares in the IPO, with the final valuation to be determined closer to the listing date.
While sources warn that Reddit’s IPO plans may face delays, the company spokesperson declined to comment on these speculations.
Founded in 2005 by Steve Huffman and Alexis Ohanian, Reddit gained prominence for its specialized discussion groups and unique voting system where users can vote “up” or “down” content posted by others. Despite generating revenue primarily through advertising and offering premium access for $5.99 per month, the platform has yet to turn a profit, as Huffman highlighted in a Reddit post last June.
The decision to go public was motivated by Reddit’s search for profitability and market conditions. The company, wary of market volatility and having experienced delays in the past, opted to wait until it was close to profitability before launching the IPO.
Projected advertising revenue for 2023 is slightly over $800 million, a growth of more than 20% over the previous year. Reddit’s decision to charge companies for access to its application programming interface (API) has generated mixed reactions from users, some of whom rely on third-party apps to access the platform.
As Reddit prepares to join the ranks of publicly traded companies, its performance will be closely watched, especially amid a resurgence of interest in big social media stocks, fueled by a rally in technology stocks over the past year. Meta Platforms (Facebook) and Snap have witnessed significant increases in their share values, reflecting the overall positive trend in the sector.
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