Social media company Reddit filed its IPO prospectus with the Securities and Exchange Commission on Thursday, after a year of preparation. The company plans to list on the New York Stock Exchange under the symbol “RDDT.”
Reddit said it had $804 million in annual sales for 2023, up 20% from $666.7 million a year earlier, according to the filing. The social networking company’s core business depends on online advertising sales from its website and mobile app.
The company said it has suffered net losses since its inception. It reported a net loss of $90.8 million for the year ended Dec. 31, 2023, compared with a net loss of $158.6 million a year earlier.
As of the fourth quarter of 2023, Reddit said its average revenue per user, or ARPU, in the United States was $5.51, down from $5.92 a year earlier. The company’s ARPU was $3.42, down 2% year-over-year from $3.49.
Reddit said that by 2027, the company estimates its “total global ad addressable market, excluding China and Russia, will be $1.4 trillion.” Currently, Reddit said that the advertising market is worth $1 trillion, excluding China and Russia.
The company said it is building its “search capabilities” and can “more fully address the $750 billion opportunity in search advertising that S&P Global Market Intelligence estimates will be the market in 2027.”
Reddit also detailed its plans to use AI technologies to improve its advertising business and plans to “open additional monetization channels for Reddit by providing our users and creators with the tools and incentives needed to drive creation, enhancements, and commerce continue.”
It is also “in the early stages” of developing and monetizing a data licensing business, in which third parties would be allowed “to access, search and analyze the data on our platform.”
“In January 2024, we entered into certain data licensing agreements with an aggregate contract value of $203 million and terms ranging from two to three years,” Reddit said of its data licensing business. “We expect a minimum of $66.4 million of revenue to be recognized during the year ending December 31, 2024, and the remainder thereafter.”
Reddit said its non-employee moderators known as Redditors will be able to participate in the company’s initial public offering through its “direct share program.” Because of this, Reddit said it is possible that “individual investors, retail or otherwise, will make up a larger percentage of investors participating in this offering than would typically be the case for an initial public offering.”
“These factors could cause volatility in the market price of our Class A common stock,” the company said in the filing, adding that it has three classes of authorized common stock, namely Class A common stock, Class B common stock and Class A common stock. C common stock.
“The rights of holders of Class A common stock, Class B common stock and Class C common stock are identical, except for voting and conversion rights,” the document reads. “Each share of Class A common stock is entitled to one vote. Each share of Class B common stock is entitled to 10 votes and is convertible at any time into one share of Class A common stock. Each share of Class C common stock is entitled to no votes. “
Reddit claims to have over 100,000 communities, 73 million average daily active unique users (DAUq), and 267 million average weekly active unique users.
In a section on the company’s risks, Reddit explained how its daily active unique data “may fluctuate or decline from time to time in one or more markets due to various factors.”
“For example, while we have seen greater growth in our user base during the COVID-19 pandemic, we have seen lower levels of DAUq growth and a decline in DAUq as the effects of the COVID-19 pandemic unfold. are attenuated,” the document reads. “DAUq has declined in the past including in periods following usage peaks related to certain world events, such as the onset of conflict between Russia and Ukraine in the three months ended March 31, 2022, and cultural trends, including video game releases , such as Elden Ring in the three months ending March 31, 2022 and ar/wallstreetbets related traffic in the three months ending March 31, 2021.”
Its market debut, expected in March, will mark the tech sector’s first major initial public offering of the year. It is the first IPO on social media since then Pinterest it went public in 2019.
Reddit first filed a confidential draft of its public offering prospectus with the Securities and Exchange Commission in December 2021.
The social media company, founded in 2005 by tech entrepreneurs Alexis Ohanian and Steve Huffman, has raised about $1.3 billion in funding and has a post valuation of $10 billion, according to deal tracking service PitchBook.
Publishing giant Condé Nast purchased Reddit in 2006 and then spun it off into an independent company in 2011.
Reddit is one of the most visited websites in the United States, according to analytics firm Semrush, but it has struggled to build an online advertising business comparable to tech giants like Facebook’s parent company Half and parent of Google Alphabet.
It also faced challenges with developers and moderators.
In June, several prominent Reddit moderators blocked subreddits as part of a blackout to protest the company’s decision to increase the price third-party developers pay to use its application programming interface, or API. At the time, Reddit said the pricing change was necessary because many large tech companies were using data to train large language models.
This is breaking news. Please check back for updates.