Reddit has filed for an initial public offering, revealing the social media platform's losses are narrowing and helping fuel a revival of its still volatile U.S. listing.
The San Francisco-based company filed to move forward with its IPO on Thursday with the U.S. Securities and Exchange Commission, more than two years after first secretly filing plans in what is expected to be one of the year's biggest public offerings.
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Reddit does not plan to disclose the terms of its proposed IPO, including its valuation at the time of listing, until a later filing.
The company has been advised to consider an IPO valuation of at least $5 billion and could begin selling shares as early as March, Bloomberg News reported.
Reddit, which was founded in 2005, averaged 73.1 million daily active unique visitors in the fourth quarter, according to filings. After the site's forum WallStreetBets shocked the stock market, it became a symbol of the so-called meme stock era.
The company reported a net loss of $90.8 million on revenue of $804 million in 2023, compared to a net loss of $158.6 million on revenue of $666.7 million in the same period last year. Ta.
amer sports, arm
The company is a high-profile addition to this year's list of new and soon-to-be public companies. Since January 1, 34 companies have raised more than $7.1 billion in IPOs on U.S. exchanges, according to data compiled by Bloomberg. The largest of these listings was Amer Sports' offer in January for $1.57 billion.
The stock prices of these companies rose more than 14% on a weighted average basis. This comes as semiconductor design firm Arm Holdings and three other companies went public in September and October at below IPO prices, prematurely ending a much-anticipated recovery in listings after two years of stagnation. are in contrast.
Arm's $5.23 billion offer was the largest this year and has since soared 152%. But excluding Arm, the 166 companies that raised about $21 billion last year returned just 13% on average, according to the data.
market test
Reddit could be the first big market test of 2024 for venture capital-backed technology startups. The company has raised $1.38 billion, giving it a $10 billion valuation after the 2021 funding round, according to data provider Pitchbook. The company's filing followed one day from another similar startup, Astera Labs.
The company's listing is being closely watched by IPO candidates such as Microsoft-backed data security startup Rubrik and medical payments company Waystar Technologies.
Reddit co-founder and CEO Stephen Huffman said in a signed letter included in the filing that the company has many opportunities to grow both its platform and business.
Advertising and AI
“Advertising is our first business, and advertisers of all sizes are finding Reddit to be the best place to find engaged customers they can't reach anywhere else,” Huffman said. “Advertising on Reddit is rapidly evolving, but we're still in the early stages of growing this business.”
Reddit said it is in the early stages of allowing third parties to license access to data on the platform, including for training artificial intelligence models. The company announced in January that it had signed a data license agreement with a total value of $203 million and a term of two to three years. The company expects to generate at least $66.4 million in revenue from these contracts this year, according to filings.
On Thursday, Reddit separately announced a deal with Alphabet Inc.'s Google that will allow Google's AI products to use Reddit's data to improve its technology. Improving large-scale language models often requires vast amounts of human-generated content.
The company plans to reserve IPO shares for purchase by users and moderators who created accounts before January 1, according to the filing. The amount of shares to be allocated under the oriented stock program will be disclosed at a later date. These shares are not subject to any lock-up period, so owners can sell them on the day trading begins.
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Greg Martin, co-founder of Rainmaker Securities, said the program could be a way for Reddit to generate enthusiasm for stocks.
Based on the company's revenue, Martin said he expects it will be difficult for Reddit to reach the $4.8 billion valuation it trades on the private secondary market.
“It's clear that sophisticated investors won't actively participate in public debuts, and the reason Reddit offers stocks to its users is to gain supporters for stocks and prevent the negative meme stock phenomenon among fans. “I guess so,” Martin said.
new home ownership
Reddit's largest shareholder is Advance Magazine Publishers, part of the Newhouse family publishing empire that owns Condé Nast, which acquired Reddit in 2006 and spun it off in 2011. . The company held 34% of the voting power before going public, filings show.
Mr. Huffman owns the stock, giving him 3.5% voting power. This indicates that Class A shares sold in an IPO will have one voting power, while Class B shares will have 10 voting rights. Mr. Huffman also has a voting representation agreement with Advance.
Other major shareholders include Chief Operating Officer Jennifer Wong, as well as FMR LLC, an affiliate of OpenAI CEO Sam Altman, Tencent Holdings, Vy Capital, Quiet Capital, according to the filing. This includes Tacit Capital.
Huffman's co-founder, venture capitalist Alexis Ohanian, is not listed as an investor with more than a 5% stake and is not named elsewhere in the filing. do not have.
Reddit invests in cryptocurrencies, but filings show that the digital assets held at the Treasury are limited to those deemed by the SEC to be likely not securities. ing.
The company invested some of its surplus cash in Bitcoin and Ether, acquiring Ether and Matic to pay for the sale of some virtual goods.
The proposal is led by Morgan Stanley, Goldman Sachs Group, JPMorgan Chase & Co., and Bank of America. The company plans to trade its shares on the New York Stock Exchange under the symbol RDDT.
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