Reddit files publicly for IPO after two years on the sidelines

Reddit Inc. filed for an initial public offering, confirming its revenue growth and helping to propel a still tenuous resurgence in US listings.

The San Francisco-based social media company, more than two years after first filing confidentially with the US Securities and Exchange Commission, submitted those plans publicly on Thursday.

Reddit won’t disclose proposed terms for the IPO, including its valuation in a listing, until a later filing. The company has been advised to consider a valuation of at least $5 billion in an IPO and could begin marketing the shares as soon as March, Bloomberg News previously reported.

The company is a high-profile addition to the year’s roster of newly and soon-to-be public companies. Thirty-four firms have raised more than $7.1 billion in IPOs on US exchanges since January 1, according to data compiled by Bloomberg. The biggest of those listings was the $1.57 billion offering by Amer Sports Inc. in January.

Shares of those companies have gained more than 14% on a weighted average basis. That contrasts with Arm Holdings Plc and three other companies that went public in September and October and fell below their IPO prices, putting a quick end to an anticipated rebound in listings after a two-year slowdown.

Arm, whose $5.23 billion offering was the biggest of the year, has since rocketed 152%. Excluding Arm, though, the 166 companies that raised about $21 billion last year have gained an average of only 13%, the data show.

Reddit could be 2024’s first major test of the market for a technology startup backed by venture capital. The company, which has raised $1.38 billion, was valued at $10 billion after a 2021 financing round, according to data provider PitchBook.

Its listing will be watched closely by IPO candidates such as Microsoft Corp.-backed data security start up Rubrik Inc. and health-care payments company Waystar Technologies Inc.

Reddit, founded in 2005, averaged 73.1 million daily active unique visitors in the fourth quarter, according to the filing. It became an icon of the so-called meme-stock era after a forum on the site, WallStreetBets, jolted the stock market.

The company had net loss of $90.8 million on revenue of $804 million in 2023, compared with a net loss of $158.6 million on revenue of $666.7 million a year earlier, according to the filing.

Co-founder and Chief Executive Officer Steven Huffman said in a signed letter included in the filing that Reddit has many opportunities to grow both the platform and the business.

“Advertising is our first business, and advertisers of all sizes have discovered that Reddit is a great place to find high-intent customers that they aren’t able to reach elsewhere,” Huffman said. “Advertising on Reddit is rapidly evolving, and we are still in the early phases of growing this business.”

Reddit said it’s in the early stages of allowing third parties to license access to data on the platform, including to train artificial intelligence models.

The company will set aside shares in the IPO to be bought by users and moderators who created accounts before January 1, according to the filing. The amount of stock to be allotted in the directed share program will be disclosed later.

Reddit’s largest shareholder is Advance Magazine Publishers Inc., part of the Newhouse family publishing empire, with 34% of the voting power before the offering, the filing shows.

Huffman owns shares giving him 3.5% of the voting power. That includes Class B shares that will have 10 votes each compared with one each for the Class A shares to be sold in the IPO, the filing shows. Huffman also has a voting proxy agreement with Advance.

Other large shareholders include Chief Operating Officer Jennifer Wong, as well as FMR LLC and entities affiliated with OpenAI Chief Executive Officer Sam Altman, Tencent Holdings Ltd., Vy Capital and Quiet Capital and Tacit Capital, according to the filing.

Reddit has made investments in cryptocurrencies, though the digital assets held in treasury are limited to those recognized by the SEC as likely not being securities, the filing shows. It invested some of its excess cash reserves in Bitcoin and Ether, and acquired Ether and Matic as a form of sales payment for some virtual goods.

The offering is being led by Morgan Stanley, Goldman Sachs Group Inc., JPMorgan Chase & Co. and Bank of America Corp. The company plans for its shares to trade on the New York Stock Exchange under the symbol RDDT.