Reddit Hasn’t Turned A Profit In Nearly 20 Years, But It Just Filed To Go Public Anyway

Reddit, the discussion board site noted for its constantly online user base and for sparking much internet debate, filed for its long-awaited initial public offering on Thursday.

This would make Reddit the first social media business to go public since Snapchat in 2017. The offering will include a twist that may allow some of the most ardent of its more than 70 million daily users to purchase shares in the IPO — something generally reserved for institutional investors.

Reddit Hasn’t Turned A Profit In Nearly 20 Years, But It Just Filed To Go Public Anyway

The company  claimed that top users can buy shares based on their “karma,” a term the network uses to describe its users’ contributions and reputation on the website.

“Our users feel a strong feeling of ownership over the communities they form on Reddit. We want this sense of ownership to translate into real ownership — for our users to be our owners’, co-founder and CEO Steve Huffman wrote in a Thursday filing letter. “Becoming a public company makes this possible.”

The company’s registration comes amid a dip in the overall IPO market, with Wall Street hoping that a blockbuster offering will help revitalise dealmaking.

According to a Securities and Exchange Commission filing, the San Francisco-based company plans to list on the New York Stock Exchange under the “RDDT.” The filing comes nearly three years after Reddit recruited its first CFO, and officials, including co-founder and CEO Steve Huffman, began publicly discussing the potential of an IPO to raise the company’s visibility.

Reddit, which has not been profitable, plans to expand its revenue through advertising, offering more e-commerce options, and licensing its data to other companies to train their artificial intelligence models.

“Our work to make Reddit faster, easier to use, easier to moderate and govern, and simpler to navigate and find relevant communities is driving growth today and will continue to be our focus into the future,” Ms. Huffman said.

The company was sold to media giant Condé Nast in 2006 by its co-founders Alexis Ohanian, who left the company in 2020, and Huffman, who now owns 3.3%. According to the IPO filing, the company’s top shareholders are currently Advance Publications (30.1%), which owns Condé Nast, Tencent (11%) from China, and OpenAI CEO Sam Altman (8.7%).

History of the ‘Front Page of the Internet’
The company, dubbed the “front page of the internet,” is a social media veteran; the firm was founded in 2005, the year college buddies Huffman and Ohanian graduated from the University of Virginia. It was the same year that Facebook became Facebook, YouTube released its first video, and Twitter (now known as X) launched.

Reddit’s 18-year history as an online social hub has witnessed tremendous growth, occasional controversy, and sometimes market-shifting pranks.

The network is well-known for its “subreddits,” which are distinct, user-generated discussion boards where users establish communities around various topics ranging from sports to politics to religion and everything in between. the company  users frequently post anonymously in these areas, debating topics ranging from memes to big news events.

Reddit Hasn’t Turned A Profit In Nearly 20 Years, But It Just Filed To Go Public Anyway

In 2021, Reddit created widespread market disruption when a community of day traders on the WallStreetBets platform began buying up GameStop shares in an attempt to harm hedge funds that bet against it. Many Redditors who joined the craze late suffered big losses.

Still, the episode highlighted the power of the company communities. Following the WallStreetBets incident, Reddit announced a fresh $250 million investment round, valuing the firm at $6 billion. It also declared plans to grow its workforce and enter overseas markets.

A significant user outcry earlier this year over a proposal to charge some third-party apps millions of dollars in fees to continue using the network brought the company back into the public eye. As a result, hundreds of the platform’s most popular subreddits were offline for weeks. The protest ended after Reddit threatened to expel forum moderators if the blackout continued.

Thursday’s filing provides the most extensive look yet at Reddit’s business, which aims to expand beyond the traditional ad-supported model on which other social networks still rely heavily.

The company  says it had more than 73 million daily active users in the latter three months of 2023, up from 52 million in 2021. In its filing, the company stated that the platform would have over 100,000 active communities by December 2023.

The company’s revenues in 2023 were $804 million, up 21% from $666.7 million in 2022. Reddit recorded a net loss of $90.8 million in 2023, less than the $158.6 million loss it experienced in 2022.

Reddit Hasn’t Turned A Profit In Nearly 20 Years, But It Just Filed To Go Public Anyway

While the company estimates its total addressable market in advertising to reach $1.4 trillion by 2027, it also stated in the filing’s risk factors statement that it has “a history of net losses and we may not be able to achieve or maintain profitability in the future.”

The company  also announced intentions to increase revenue by selling data to AI startups and focusing on the “user economy.” The filing outlines a future goal to enhance e-commerce on the site and increase user incomes through the Reddit Contributor Programme and Reddit Collectible Avatars Creators Programme. According to the filing, these systems allow users to earn monetary gifts and prizes, from which the corporation may receive a share.

On Thursday, the company also announced an expanded cooperation with Google, which includes access to Reddit data to train Google’s AI models and improve the display of Reddit content across Google platforms.

SOURCE – (CNN)