Social-media platform Reddit — the home of AMAs, Wall Street Bets and thousands of other online communities — publicly filed its registration statement for an initial public offering on Thursday, detailing plans to push further into advertising, data sales and analytics, as well as what it called its budding user-driven economy.
The company, founded in 2005 but still losing money, plans to trade on the New York Stock Exchange under the ticker symbol RDDT. The IPO filing did not disclose the number of shares to be offered or their potential price. Morgan Stanley, Goldman Sachs, JPMorgan and BofA Securities are the lead book-running managers.
Reddit first confidentially filed a draft registration statement for a proposed public offering in 2021.
And in a move that comes with its share of risks, Reddit also said it would offer some of the shares in the IPO to its users and moderators, depending on their reputation and contributions to the platform. Those participants would need to be over the age of 18, live in the U.S. and have had an account on or before Jan. 1, 2024.
“We want this sense of ownership to be reflected in real ownership — for our users to be our owners,” Reddit co-founder and Chief Executive Steve Huffman said in the company’s IPO filing. “Becoming a public company makes this possible. With this in mind, we are excited to invite the users and moderators who have contributed to Reddit to buy shares in our IPO, alongside our investors.”
Some analysts noted that the company’s founders — and some big investors, including OpenAI Chief Executive Sam Altman, Tencent Holdings Ltd.
TCEHY,
and Conde Nast parent Advance Magazine Publishers — would still call the shots. And they warned that courting Reddit’s users could backfire, and that the company’s trading debut could make for a bumpy ride.
The company’s public debut would arrive amid potential signs of life in the IPO market this year but also as Reddit tries to compete with far bigger rivals such as Meta Platforms Inc.
META,
and TikTok. Some digital-media outlets, meanwhile, are waiting for a more robust recovery in the digital-advertising market.
Reddit, in its IPO prospectus, also warned that user engagement can come and go based on big cultural events — like the pandemic or Russia’s invasion of Ukraine. And it cited the prospect of rivals copying its own features as a potential risk.
The company grew sales last year to $804 million, up 20.5% year over year. However, it is still losing money. It put up a net loss of $90.8 million last year.
Still, the company said that in December, it drew more than 500 million visitors. In the quarter that ended Dec. 31, Reddit said it had an average of 73.1 million daily active uniques — defined as a user who drops by at least once in a 24-hour period. In its prospectus, Reddit pitched itself as a massive repository of human experience and interaction.
“Whatever people are into or going through, it is on Reddit,” Huffman said in the filing.
He said Reddit was developing more ways for users to make money on the platform. The filing highlighted moves to allow users earn money by creating avatars, offering photo-editing services, selling watches and commissioning art. And it said it planned to offer more developer tools and to increase the ways users can “recognize contributors with real-world money to incentivize and reward quality content creation.”
Reddit said that it takes a cut from avatar creators’ earnings, and that building out the user economy would “allow us to grow new revenue streams beyond advertising.”
Similar efforts haven’t always worked. When Hasbro Inc.’s
HAS,
Wizards of the Coast segment, which oversees the role-playing game “Dungeons & Dragons,” proposed a royalty payment on higher-earning game developers whose work used the D&D infrastructure, the efforts backfired following protests from creators.
Reddit also wants to find ways to make the ads that appear on its site more prominent, more artificial-intelligence-driven and more precise. It said it wanted to offer more video ads and ads in new places, like comment threads and search pages, along with existing ads in the home feed.
Reddit also said it was “in the early stages of allowing third parties to license access to search, analyze, and display historical and real-time data from our platform.” Customers, it said, could pay for real-time data feeds of anonymous, public discussions on Reddit. The filing also said the content on Reddit could be used to feed AI and large language models.
“Reddit is one of the internet’s largest corpuses of authentic and constantly updated human-generated experience,” the filing said. “In an increasingly data-driven world, we recognize that this information is increasingly important for a multitude of different uses and applications.”
The filing continued: “We believe the internet should work for consumers and they should be able to find the information they need or experiences they want. And, organizations need to prioritize sources of real-time human perspectives — from a company looking for feedback on a new consumer product to investors trying to capture market sentiments or signals — and Reddit provides a differentiated solution.”
Separately, Reddit announced a deal that will allow Alphabet’s
GOOGL,
GOOG,
Google to use Reddit posts to train its AI models and improve Google Search. The deal, valued at about $60 million, will “make it easier to discover and access the communities and conversations people are looking for on Reddit,” the company said.
Brianne Lynch, head of market insight at EquityZen, a platform that allows users to buy and sell shares in private companies, noted that Reddit served as a big launchpad for the meme-stock frenzy in 2021.
“Reddit is a platform that really gave a big voice to the retail investor during the whole meme-stock frenzy and their subreddit, Wall Street Bets in particular,” she said in emailed commentary. “There is this retail market that is core to their user base and it makes sense that they’re looking to some of those power users with the ability to buy into the IPO, but this definitely doesn’t come [without] risks.”
She continued: “The question is are these power users going to be mad if the stock trades down? Couple that with the fact that Reddit users are not institutional asset managers who are there to buy and hold and provide some stability to the stock.”
Jim Angel, a faculty affiliate at Georgetown University, said shares of Reddit were likely to be volatile since the company hasn’t yet turned a profit. And he noted that the company has a three-class ownership structure, with super-voting shares, low-voting shares and nonvoting shares.
“Investors should be aware that the founders will keep control, for good or ill,” he told MarketWatch via email.
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