It’s a move that has been eagerly awaited by technology enthusiasts and investors alike, except, now it’s actually happening. Reddit has finally announced its filing to go public, marking a pivotal moment in the IPO landscape for 2024. The social media behemoth’s decision to enter the public market could spearhead a series of public listings from a cohort of richly valued technology startups and private companies seeking exits this year.
The Journey to Public
Reddit’s path to the public markets has been anything but straightforward. Initially sold in its infancy, it was later spun back out as an independent entity. Today, it stands on the brink of a public offering, boasting over $800 million in revenue for 2023, a notable increase from $666.7 million in 2022. Despite this growth, Reddit has yet to achieve profitability, raising questions about its potential valuation upon listing.
In 2022, the platform reported a net loss of $158.6 million, with its adjusted EBITDA sitting at negative $108.4 million. These figures saw improvement in 2023, with a net loss narrowing to $90.8 million and negative adjusted EBITDA improving to $69.3 million. The final quarter of 2023, however, painted a more optimistic picture, with Reddit posting a net profit of $18.5 million, despite ending the quarter with negative free cash flow of $22 million.
Sam Altman is revealed as Reddit’s third-largest shareholder, owning approx. 8.7% of the company ahead of its IPO.
Estimates suggest that Altman’s stake is worth $435M from a $60M investment.
Here’s the cap table: pic.twitter.com/i2GhHZkVYV
— Chief AI Officer (@chiefaioffice) February 23, 2024
Capital and Valuation
Throughout its tenure as a private entity, Reddit raised over $1 billion, with significant rounds of funding in 2021 driving its valuation into the billions. Yet, as Reddit prepares for its IPO, these “bubble-era” valuations will be scrutinized under the intense gaze of the public market.
An IPO with a Novel Approach
In an innovative twist, Reddit plans to offer an unspecified number of shares to 75,000 of its users at the IPO price, a privilege typically reserved for large institutional investors. This strategy not only underscores Reddit’s commitment to its community but also represents a novel approach to public offerings.
Strategic Partnerships and Growth Prospects
The timing of Reddit’s IPO filing is opportune, coinciding with a reported $60 million per year data use agreement with Google. This deal, which represents a significant portion of Reddit’s revenue, exemplifies the potential for additional revenue streams through partnerships with other AI model providers, such as OpenAI.
Reddit’s S-1 filing reveals plans to license access to its historical and real-time data, a move that could significantly enhance its revenue streams. With a growing user base and a 27% increase in global daily active users in the last quarter of 2023 alone, Reddit’s market potential appears robust.
The Road Ahead
As Reddit embarks on its public journey, the broader implications for the tech and investment sectors are immense. Successful navigation of the public markets could not only validate Reddit’s business model but also encourage other late-stage tech companies to consider public listings.
We encourage our readers to share their thoughts and predictions about Reddit’s public debut in the comments below. How do you think Reddit’s IPO will impact the broader tech ecosystem? Let’s discuss.
Photo by Brett Jordan on Unsplash
