The company didn’t immediately disclose how much money it intends to raise. Reddit will list on the New York Stock Exchange under the ticker RDDT. The deal is being co-managed by
Morgan Stanley,
Goldman Sachs,
J.P. Morgan,
and BofA Securities.
Reddit operates as a sort of old-school digital bulletin board that covers every imaginable topic. “Reddit is where people come to explore their interests, learn, express themselves, create and understand other people’s experiences and perspectives,” the company said in the filing.
According to the filing, Reddit had 2023 revenue of $804 million, up 20.6% from 2022. Most of that comes from advertising, but the company also sees an opportunity to license its data for AI model training.
“We are in the early stages of allowing third parties to license access to search, analyze, and display historical and real-time data from our platform,” Reddit said in the filing. Reddit also said it sees opportunity for adding commerce to the platform.
Reddit had a loss in the latest year of $90.8 million, narrowing from a loss of $158.6 million in 2022. Reddit incurred a loss in terms of adjusted Ebitda, or earnings before interest, taxes, depreciation and amortization, of $69.3 million, compared with a loss of $108.4 million on the same basis in 2022. Reddit reported negative free cash flow in the latest year of $84.8 million, slightly less than the $100.3 million of negative free cash flow in 2022.
Reddit had about $1.2 billion in cash and marketable securities on its balance sheet at year end.
According to the filing, Reddit has 73 million active users, 267 million weekly unique users, and 1 billion cumulative posts through 2023.
“One of the founding principles of Reddit was that it be a real place cultivated by real people instead of a fake place manicured by editors and other gatekeepers,” co-founder and CEO Steve Huffman said in a letter included in the filing.
“Reddit is not a social media platform optimized for self-display; it is a community that rewards candor and honest advice. This is why millions of people trust Reddit for everything from relationship guidance to in-depth product recommendations (and add “reddit” by name to their searches for virtually anything). We have confidence in the magic of human-curated organization, creativity, and generosity. Reddit enables these human virtues, which means we can mostly stay out of the way.”
Huffman also noted that Reddit lets users choose whether or not to reveal their actual identities.
“We believe it is more respectful and safer not to force users to combine their real-world and online identities,” he wrote. “Reddit allows people to be themselves, to be vulnerable and honest in a way that is difficult or sometimes impossible in the real world or other places online. Looking around, it’s easy to be disheartened about people and the state of the world, but on Reddit I have experienced the opposite: people naturally create community, and they are smarter, funnier, and more helpful and caring than I think we often give them credit for.”
The largest single investor in Reddit is Advance Magazine Publishers, a company controlled by the Newhouse family, which owns Condé Nast, American City Business Journals and other media properties. Advance also holds substantial stakes in
Charter Communications
and
Warner Bros. Discovery.
Advanced owns a 30.1% stake in Reddit.
OpenAI CEO Sam Altman holds an 8.7% stake in the company. Other large investors include Fidelity, with 8.4%; the venture funds Quiet Capital and Tacit Capital, both tied to the investor and former NFL football player Ben Mahdavi, with 6.8%; the Chinese internet giant Tencent, with 11%; and Vy Capital, an investor firm formed by Alexander Tamas, a former partner of the Russian billionaire investor Yuri Milner, with a 5.1% stake. Huffman has a 3.3% stake.
The Reddit offering will post a new test of the stock market’s appetite for tech IPOs, which has been mostly dormant for the last two years. A flurry of three IPOs last fall, for
Arm Holdings,
Instacart,
and
Klaviyo,
failed to stir up other deals. It also comes as the market has grown cautious about smaller social media plays, with Snap down 37% year to date, and
Pinterest
off 3%.
Reddit has raised $1.3 billion in venture capital. Its most recent round, in 2021, valued the company at $10 billion.
Pinterest might offer a reasonable proxy for the valuation for Reddit shares. Pinterest shares trade for about seven times expected 2024 revenue, with the Street anticipating growth of about 17%. If Reddit can generate another year of 20% growth, that would suggest revenue this year could be about $960 million, implying a potential valuation of $6.7 billion.
But while Reddit is growing a bit faster, Pinterest is profitable, which Reddit isn’t. That might suggest a lower valuation would make more sense. Note that Snap trades at about four times forward sales; at that level the valuation could be below $4 billion.
Write to Eric J. Savitz at eric.savitz@barrons.com
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