Reddit IPO: When will Reddit go public?
Reddit confidentially filed for its IPO on December 15 2021. It was expected to go public in Q4 2021, but - like a lot of listings - it's been continually pushed back as volatility swamped equity markets for most of 2022.
Now, a report by The Information states that sources have said Reddit will be aiming to list in late 2023 provided market conditions stabilise. However, it's equally likely they're just keeping their filings up to date to make it easier when they do decide to list, whether that's this year or not.
The company is expected to list on the New York Stock Exchange, but as yet the size, ticker and price of the IPO are unknown.
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What do Reddit users think about the Reddit IPO?
Reddit users on the forum r/WallStreetBets have already vocalised their concerns about the move to take the firm public. The main criticism seems to be that as a listed company, Reddit will need to start generating more income to please shareholders, which could result in users seeing more advertising and modifications to the experience.
How much is Reddit worth?
Reddit was valued at $10 billion in a private fundraising round in August 2021. When it first decided to list, it was aiming for a valuation of more than $15 billion but whether that will hold or not is another matter. A lot of IPO valuations have dropped significantly over the last two years given market conditions, so it's likely Reddit's valuation will be revised prior to listing.
What does Reddit do?
Reddit is an online discussion board and community, founded in 2005 by Steve Huffman and late activist Aaron Swartz. Despite not being as popular as other social media firms such as Facebook, Instagram and Twitter, Reddit has made its name with niche – and often controversial – discussion groups.
Reddit has more than 100,000 communities, in which over 53 million active daily users share their thoughts and ideas on a range of topics. In fact, Reddit is currently the 19th-most-visited website on the internet, and the sixth-most-popular social networking site.
The site allows users to post anonymously, which is supposed to encourage honestly and transparency. Any post can be voted on by the community; posts with the largest number of up votes are viewed more and hold greater authority.
Most recently, Reddit has become a hub of retail investors, flocking to the board r/WallStreetBets to discuss tips and ideas on stock trading. The community – known as a subreddit – was responsible for the rise of GameStop and other so called ‘meme stocks’. Their intentions were to profit as hedge funds covered their short positions, in what’s known as a short squeeze.
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How does Reddit make money?
Reddit makes its money through advertising on its site. It reported that in Q2 2021, it made $100 million in ad revenue – three times the amount it made in Q2 2020.
For users who don’t want ads on their feeds, there is a ‘premium membership’ available, which grants an ad-free experience as well as full access to the r/lounge, 700 free monthly coins, and other benefits. The membership costs $5.99 per month or $49.99 per year.
Reddit also generates money through Reddit Coins, which are virtual goods that Reddit users can purchase in bundles and gift to other Reddit users to reward them for their contributions and good content. Coin bundles cost between $1.99 to $199.99.
Other benefits to users holding Reddit Coins include access to the r/lounge. Which is an exclusive subreddit group for Premium members only.
Reddit has also raised capital through eight rounds of fundraising, generating a total of $919 million from 27 different institutional investors.
Is Reddit profitable?
No, Reddit isn’t yet profitable. In 2020, Reddit reported $170 million in revenue.
What is Reddit's business strategy?
Reddit’s business strategy thus far is a pretty odd one, given that the firm sacrifices the opportunity to make money in order to keep its users happy. As we’ve seen, advertising space sales are the company’s primary revenue stream. However, Reddit does not require email addresses and does not track personal information, losing out on the opportunity to increase advertising through data exploitation, in order to keep its users anonymous.
And this is where one of the biggest challenges Reddit could face comes in: regulation. Due to the anonymity of users, there’s always the possibility of malpractice and manipulation, such as bots or even hedge funds driving users toward certain stocks. Reddit does already have moderators in place, but once it’s a public firm the level of scrutiny it’ll face will likely increase. Any thread to the anonymity of users could cause an exodus from the platform.
After half a decade neglecting its ad platform, Reddit has begun to invest heavily in this area before it goes public, so we may see the company reach profitability by 2022.
Reddit announced in 2020 that it was buying video creation app Dubsmash, entering into direct competition with TikTok.
The company also just hired its first ever chief financial officer, Drew Vollero (previous CFO for SNAP) in what many see as preparation for its IPO.
Who owns Reddit?
Reddit is owned by Condé Nast Publications, a global media company, who bought the company from founders Huffman and Ohanian one year after it was created for $10 to $20 million.
Current investors in Reddit also include Fidelity Investments, Andreessen Horowitz, Sequoia Capital and Tencent Holdings.
Board of directors of Reddit
Reddit’s board of directors includes:
- Paula Price
- Michael Seibel
- Porter Gale
- Sam Altman
- Bob Sauerberg