The social media forum Reddit, which has been around for nearly two decades, is finally going public. An SEC filing released today shows the company wants to raise up to $748 million in its next stock launch, which would bring its valuation up to $6.5 billion.
According to the document, Reddit plans to sell 22 million shares at a price between $31 and $34 per share. The company has allocated approximately 1.76 million shares to its most invested users.
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Reddit had more than a billion posts and 16 billion total comments from users through the end of last year, according to the document. The site attracted more than 500 million monthly visitors in December 2023 alone.
Steve Huffman, co-founder and CEO of Reddit Inc. Photo by Zach Gibson/Getty Images
Semrush data reveals that Reddit was the third most visited website in the US in December 2023, beating Facebook by a difference of around 535 million views. Twitter, Instagram and TikTok lagged behind in 10th, 13th and 17th place respectively.
Reddit could be the first major tech initial public offering (IPO) of 2024. The document highlights the pros and cons of the platform and the value it offers to users and investors.
The value of Reddit
Throughout the document, Reddit highlighted factors that set its platform apart from the competition, with the word “trust” appearing nearly 100 times in the document and “authentic” 39 times.
“Reddit’s community ecosystem is built organically on shared interests, passions, and trust rather than friends, celebrities, and their followers,” the document reads. “This distinction translates into a unique sense of belonging, privacy and authenticity for our users.”
Artificial intelligence was also a topic addressed directly by Reddit, calling the site’s content “a key part” of the formation of the main AI models on the market. Reddit also built AI internally to address onboarding, translation, and content moderation.
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“Our massive body of data and conversational knowledge is what makes us unique, and we believe its value will continue to grow over time as our user-generated data continues to grow,” Reddit wrote.
The risks of Reddit
In the filing, Reddit also identified several events that could hurt the company’s growth. Industry competitors, lower quality ads, technical issues, inappropriate uses of the platform and negative publicity were all factors listed by the company.
Reddit warned in the document that its community’s participation in the IPO could cause “increased volatility” in its stock price. Reddit users have manipulated low-yielding stocks or “meme stocks” before, with GameStop being a notable example that has caused institutions to lose billions of dollars.
Reddit has also never returned profits, and the company warns that it may have net losses in the future. As of December 2023, Reddit had a deficit of approximately $716.6 million.
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The site is still in the early stages of generating revenue, and its ability to make a profit depends on scaling its advertising business and experimenting with other ways to generate revenue. Reddit documents show that there is no guarantee that the company will be able to obtain non-advertising revenue.