Reddit, The Self-Anointed ‘Front Page Of The Internet,’ Set To Make Its Stock Market Debut

SAN FRANCISCO — Reddit and its varied bazaar of online groups are preparing to enter high-stakes territory: the stock market.

The company priced its initial public offering at $34 per share on Wednesday, and shares will begin trading on Thursday on the New York Stock Exchange under the ticker “RDDT.” The market debut is expected to spark a rush of commentary on Reddit and other social media platforms.

The IPO will increase eccentric companies’ capacity to develop sustainable businesses despite their nearly 20-year history of continuous losses, management instability, and occasional user outrage.

Reddit, The Self-Anointed ‘Front Page Of The Internet,’ Set To Make Its Stock Market Debut

Reddit’s popularity originates mostly from a big audience that accesses the service regularly to discuss a wide range of topics ranging from stupid memes to existential concerns and to receive suggestions from like-minded people.

According to the regulatory disclosures required before the San Francisco firm goes public, approximately 76 million people accessed one of Reddit’s roughly 100,000 groups in December. Reddit set aside up to 1.76 million of the 15.3 million shares offered in the IPO for its members. As is customary with IPOs, the remaining shares are expected to be purchased mostly by mutual funds and other institutional investors believing that Reddit is ready for prime time.

Reddit’s revenue potential has also attracted several important backers, like OpenAI CEO Sam Altman. Altman acquired a stake as an early investor and is now one of the company’s largest shareholders. According to the company’s IPO filings, Altman owns 12.2 million shares of Reddit stock.

Reddit, The Self-Anointed ‘Front Page Of The Internet,’ Set To Make Its Stock Market Debut

Reddit’s early investors included PayPal co-founder Peter Thiel, Academy Award-winning actor Jared Leto, and musician Snoop Dogg. None are identified as Reddit’s top shareholders ahead of the IPO.

By computer industry standards, Reddit remains incredibly small for a firm that has been around for so long.

With a stock price of $34 per share, Reddit’s market capitalization will be $6.4 billion. Meanwhile, Meta Platforms, whose flagship social media service, Facebook, was founded only 18 months before Reddit, has a market capitalization of more than $1.2 trillion. Meta also has an annual revenue of $135 billion, while Reddit’s is less than $1 billion.

And then there’s this problem: Reddit has never profited from its enormous reach, accumulating $717 million in losses. That figure has risen from accumulated losses of $467 million in December 2021, when the business first applied to go public before abandoning the effort.

In the most recent paperwork filed for its relaunched IPO, Reddit ascribed the losses to a recent emphasis on discovering new ways to increase revenue.

Not shortly after its inception, Reddit was sold to magazine publisher Conde Nast for $10 million, removing the company’s need to operate as a distinct corporation. Even after Conde Nast parent Advance Magazine Publishers broke off Reddit in 2011, the firm stated in its IPO filing that it would not begin to focus on income generation until 2018. These initiatives, primarily focused on selling ads, helped the social platform raise its annual revenue from $229 million in 2020 to $804 million last year. However, the San Francisco-based corporation lost $436 million between 2020 and 2023.

Reddit’s filing presented a strategy calling for increased ad revenues on a service that it believes would be a great marketing magnet since so many people look for product suggestions.

The company also hopes to make more money by licensing access to its information in partnerships akin to Google’s recent $60 million agreement to help train its artificial intelligence algorithms. That objective, however, was almost immediately challenged when the United States Federal Trade Commission started an investigation into the agreement.

Reddit, The Self-Anointed ‘Front Page Of The Internet,’ Set To Make Its Stock Market Debut

According to its IPO filing, Reddit’s management is investigating ways to acquire a piece of the action as the platform’s e-commerce transaction volume grows. “We believe that over time, we can generate revenue based on the volume of commerce that is conducted on Reddit,” the business stated in the filings, without providing details on how this would be accomplished.

Reddit has also had numerous leadership changes, which may deter some prospective investors. Company co-founders Steve Huffman and Alexis Ohanian, also the husband of tennis superstar Serena Williams, left Reddit in 2009 while Conde Nast was still in charge, only to return years later.

Huffman, 40, is now CEO, but his hiring process exemplifies how ugly things can get at Reddit. The shift in command occurred in 2015 when Ellen Pao resigned as CEO amid a heated user outcry over the banning of many communities and the dismissal of Reddit’s talent director. Despite Ohanian’s claim that he was primarily responsible for the dismissal and ban, Pao received most of the criticism, creating the path for Huffman to return to the company’s leadership.

Although his founder’s letter before this IPO did not mention it, Huffman commented on the company’s past problems in another note included in a December 2021 filing effort that was later cancelled.

“The list of our mistakes over the years is long, and so is the list of challenges we’ve faced,” Huffman wrote. “We faced these challenges openly and have the scars, lessons, and policy modifications to prove it. Our past influences our future. There will probably be other hurdles to come.”

SOURCE -(AP)