Reddit, the community-focused message board site, filed for a public offering on Thursday, paving the way for it to be the first major social media company to debut publicly in years and a test for private companies after a drought in the initial public offerings.
In an offering prospectus, Reddit revealed its financial performance in preparation for selling shares to investors. The San Francisco-based company reported revenue rose more than 20 percent as losses narrowed last year. He added that it had 73 million daily users and more than 100,000 active communities.
The prospectus kicks off an IPO process, with the 18-year-old company coming to meet potential investors to whet their appetites for buying its shares. Reddit could go public on the New York Stock Exchange in a few weeks under the ticker symbol RDDT.
Reddit’s bankers are seeking a valuation of at least $5 billion in its IPO, according to two people familiar with the matter. That’s about half of the $10 billion valuation the company got in a private financing round in 2021. Talks are ongoing, and the price could rise or fall in the coming weeks.
Reddit is the latest of a previous generation of social media companies to go public, following the high-profile offerings of Facebook in 2012, Twitter in 2013 and Snap in 2017. In the years since, the social media industry has changed, addressing scrutiny for misinformation, hate speech and other impacts. Some of the companies have changed directions. Facebook was renamed Meta and Twitter was bought by Elon Musk, who took the company private in 2022 and renamed it X.
Reddit’s move is also highly anticipated after a lull in initial public offerings. Just 108 companies went public in the United States last year, about a quarter of the number that will debut in 2021, according to data compiled by Renaissance Capital. Some of the biggest tech deals last year were chip designer Arm and grocery delivery company Instacart.
“We are going public to advance our mission and become a stronger company,” Steve Huffman, Reddit’s chief executive, said in a founder’s letter included in the newsletter. “We hope that going public will bring significant benefits to our community as well. Our users have a deep sense of ownership in the communities they create on Reddit.”
Mr. Huffman added that the company wanted “that sense of ownership to be reflected in real ownership — for our users to be our owners” and that “going public makes that possible.” Reddit said it would reserve a chunk of its shares at the IPO price for 75,000 of the company’s most prolific users if they wanted to buy them.
In its prospectus, Reddit said revenue in 2023 was $804 million, up about 21 percent from $666 million a year earlier. The company lost $90 million in 2023, compared with a loss of $158 million the previous year, according to the prospectus.
Some of its largest shareholders include Advance Magazine Publishers, Tencent Cloud Europe, Vy Capital, Fidelity Management and Sam Altman, former Reddit board member and CEO of OpenAI.
Reddit’s path to going public has been long and difficult. Founded in a University of Virginia dorm in 2005 by Mr Huffman and Alexis Ohanian, the site began as a destination for anonymous users to meet and discuss anything from popular TV shows to guitars, makeup and power washers.
The site was unique in that it focused heavily on tight-knit communities, mostly anonymous, all moderated by volunteers who self-managed their forums, or “subreddits,” based on their own rules. He became known for his “AMAs,” otherwise known as “ask me anything,” sessions, sometimes with public figures such as former President Barack Obama, Microsoft’s Bill Gates, and actor Nicolas Cage.
The company has raised hundreds of millions of dollars in funding over the years, including $250 million and more than $410 million in two funding rounds in 2021. Investors include Fidelity Investments, Andreessen Horowitz, Sequoia Capital and Tencent Holdings.
Like other early social networking efforts, Reddit initially eschewed advertising and monetization. Instead, it focused on forms of revenue that came from community ideas, such as a user-generated e-commerce system and prizes that users could buy from each other. These ideas are still in play.
Reddit eventually embraced advertising based on topic-focused communities. Brands like Laneige, for example, targeted ads on a forum called Makeup Addiction, one of the most active subreddits, where users discuss cosmetics and how to apply them.
The site has also built a pop-up data licensing business based on its massive conversation dataset, which is becoming increasingly important amid a frenzy over artificial intelligence. AI models are trained on barrels of such data so they can become more powerful. On Thursday, Reddit announced a licensing deal with Google, which used Reddit data to train and build its AI systems.
“We expect that our data advantage and intellectual property will continue to be a key element in training” future AI models, Mr. Huffman said in the letter. The company has a number of undisclosed licensing agreements for the use of its data and expects to generate more than $203 million in revenue over the next three years from those contracts, according to the filing.
The site has had its share of struggles. It faced controversy after controversy over its rejection of moderate communities in its early years, including its role in spreading misinformation during the 2013 Boston Marathon bombing and hosting racist and misogynistic content on some of its smaller subreddits. Last year, Reddit faced a user revolt after it changed some of its rules and restricted third-party developers from using the site’s content without paying for it.
Reddit has reversed its stance on moderation and updated and more strictly enforced its policies in recent years, making it more attractive for marketers to place ads across the site.
The company also had a revolving door of leaders in its first decade of operation, with four chief executives at the helm before Mr Huffman returned to lead the site in 2015.
Reddit has warned potential investors that it faces challenges and potential risks as a public company, including the rise of large language models, underlying AI systems that could potentially gather and synthesize site content and allow users to view Reddit without visit the website or view advertisements.
The company may also face difficulties courting brands in a digital ad market dominated by Meta and Google.
“Reddit may face a daunting challenge in growing its advertising business given the gap between its platform’s capabilities and best-in-class,” said Eric Seufert, an independent mobile analyst who closely follows social media companies. media and advertisements.
The company also warned that it depends heavily on its community to moderate the platform, and that future uprisings or walkouts could damage the site.
“We have a lot of opportunities and a lot to do,” Mr. Huffman said.
Lauren Hirsch contributed reporting from New York.
