Reddit Goes Public, Projects Boost In Ad Business

Reddit, the forum-style social-media platform, filed to go public on Thursday after existing for over two decades.

The company, which has been a leading IPO candidate for over two years, finished 2023 with a faster growth rate than other apps like Snapchat and Pinterest, with ad revenue up more than 20%, but reported a net loss of $90.8 million, which could limit its potential valuation when it eventually lists its shares.

Reddit first submitted a draft registration statement with the Securities and Exchange Commission to go public in December 2021, around the time the company landed a $410 million funding round led by Fidelity, valuing the company at around $10 billion.

The next month, Reddit considered a valuation of $15 billion, continuing confidently with its plans by getting Morgan Stanley and Goldman Sachs to work on the listing. However, in May 2023, Fidelity slashed its valuation of Reddit to $5.5 billion, after a difficult and controversial year for the platform.



The platform has also faced controversy over the past year, as Redditors continue to use the platform to spread misinformation and harass other users, while the company itself attracted mass protest from users when it announced plans to charge for its API, leading to beloved third-party apps being shut down.

Despite being one of the most-visited websites in the US, with over 500 million visitors in December 2023 and an average of 73.1 million daily active unique users globally in the last three months of 2023, Reddit has failed to build its online advertising business as much as rival social-media giants like Facebook parent Meta and Google parent Alphabet.

However, the company wants to turn its user growth into advertiser revenue growth, offering an ambitious estimate that by 2027 the total market globally from advertising -- specifically in regards to desktop and mobile web, display, search advertising and video and social direct-response ads, excluding China and Russia -- will reach $1.4 trillion, compared to the current number of $1 trillion.

Reddit will offer three classes of stock with different voting shares. Class A stock will come with one vote per share. Class B shares will come with 10 votes per share and can be converted at any time into one share of Class A stock. Class C shares will have no voting rights.

In a move typically reserved for larger investors, Reddit reportedly plans to reserve an undetermined number of shares for 75,000 of its users, who will be given the chance to collect shares of Reddit at its IPO price before the stock begins trading.

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