Reddit, the San Francisco-based social media platform valued at around $10 billion, is gearing up for its much-anticipated initial public offering (IPO) in March, according to a Reuters report. This move positions Reddit as the first major entrant into the IPO arena since Pinterest in 2019.
Facing formidable competition from platforms like TikTok and Facebook in the race for advertising revenue, Reddit’s IPO will serve as a litmus test for user support, considering the platform’s history of sparking “meme” stock rallies.
The company, founded in 2005, plans to file its public offering in late February, initiate the roadshow in early March, and complete the IPO by month-end. With aspirations to sell about 10 percent of its shares, Reddit will decide on the IPO valuation closer to the listing.
Despite potential delays, sources caution that Reddit’s IPO plans may encounter obstacles, as seen in the past. Renowned for its niche discussion groups, Reddit primarily generates revenue through advertising and offers premium access for a monthly fee. Despite its popularity, the platform has yet to achieve profitability.
Reddit CEO Steve Huffman acknowledges the losses, attributing them to platform investments and lower user engagement with advertising compared to other social media. The decision to proceed with the IPO was delayed until the company approached profitability, navigating market volatility that disrupted IPOs in recent years.
The IPO announcement follows Reddit’s expectation to generate over $800 million in advertising revenue in 2023, marking a 20 percent increase from the previous year. As the company seeks to monetize its vast user base, it introduced charges for accessing its application programming interface (API), leading to discontent among users relying on third-party apps.
This strategic shift signals Reddit’s effort to diversify its revenue streams beyond traditional advertising models. Despite delayed profitability, the broader social media sector has experienced a rebound, driven by a rally in technology stocks. Meta Platforms, the parent company of Facebook, witnessed a threefold surge in shares over the past 12 months, while Snap’s shares rose by 60 percent during the same period.
