Reddit Goes Public

Social media platform Reddit is set to debut this month on the New York Stock Exchange (NYSE)—the first major initial public offering (IPO) of 2024. It’s the first in the sector since Pinterest went public in 2019.

Reddit counts about 100,000 communities, with 76 million daily visitors. In an unusual move, the company—which describes itself as a combination of social media and search engine—invited 75,000 of its power-users to buy shares at the IPO.

Founded in 2005 by entrepreneur Alexis Ohanian and current CEO Steve Huffman, Reddit quietly filed for a public offering with the US Securities and Exchange Commission (SEC) in late 2021. It was then valued at $10 billion.

IPO plans are no longer stalled.

San Francisco-based Reddit is now offering about 10% of its shares, with a $5 billion valuation. In 2023, it reported $804 million revenues and a net loss of $90.8 million.

“Reddit is the latest in a series of potential IPOs, showing the market may pick up in 2024 after a lacklustre last two years,” says Mergermarket managing editor Erica Teichert. “But investors still have some trepidation at proposed valuations, as some recent IPOs have ended up priced below their initial plans, up to a 15%-20% discount.”

Per Dealogic, there were 148 US IPOs in 2023—far fewer than 2021’s 1,010 US public offerings (3,074 worldwide).

Even in this slow market, not everyone is hyped for Reddit.

“Certainly, the fact that the IPO window is open at all is a good sign,” noted Spencer Greene, General Partner at venture capital TSVC, the first institutional investor in video-call platform Zoom Technologies. “But I don’t think Reddit is a meaningful bellwether because it’s such a unique business—a company that’s been making losses for nearly 20 years, that’s delivering reasonable revenue growth but nothing earth-shattering. Folks will want to read a lot into what happens to Reddit stock, but I’d be very cautious.” Reddit’s largest stakeholders include Condé Nast owner Advance Publications, Chinese tech conglomerate Tencent, and OpenAI CEO Sam Altman, who invested at least $60 million in Reddit shares, and controls 9.2% of its voting power.