Reddit plans IPO in March, to sell 10% stocks
What's the story
Reddit, a popular social media platform, is preparing for its initial public offering (IPO) in March this year. Reuters reported that the company covertly applied for the IPO in December 2021 and plans to make its public filing in late February, followed by a roadshow in early March. A roadshow refers to a set of presentations informing the public ahead of the IPO. It is essentially a sales pitch designed to attract potential investors.
Details
Reddit valuation is around $10 billion
The social media platform was valued at around $10 billion in 2021 and intends to sell about 10% of its shares during the IPO. Reddit's final IPO valuation will be determined closer to the listing date. Founded in 2005 by Steve Huffman and Alexis Ohanian, Reddit is known for its unique specialized discussion groups and user-voted content.
What Next?
Reddit's ad revenue grew 20% but yet to become profitable
In 2023, Reddit is projected to generate just over $800 million in advertising revenue — a more than 20% increase from the previous year. However, as Huffman mentioned in a Reddit post last June, the company has not yet become profitable. The platform's losses are due to investments and users engaging less with advertisements as compared to other social media sites like Facebook, X, and Instagram.
Insights
IPO to test Reddit's paid API gamble
In 2021, Reddit announced that it would charge companies for access to its application programming interface (API), which technology firms use to train large-language models for artificial intelligence. This decision upset some users who rely on third-party apps to access Reddit. The upcoming IPO will test whether these users are willing to support the company's stock market debut. Reddit's IPO would be the first listing of a major social media company since Pinterest's debut in 2019.