On Thursday, Reddit’s US IPO filing to the stock regulator reveals that its net losses have been narrowed to $90.8 million, while the revenue growth was almost at 21% in 2023.
The social media company made its IPO filing available to the public in the build up to its highly anticipated US stock market IPO in March. This IPO filing comes almost two decades after Reddit’s introduction in the social media space, which will be a major test for the social media platform that still lags behind its competitors in terms of commercial success.
According to the filing, Reddit has a good customer base with 73.1 million daily active users and nearly 267.5 million weekly active users in the last quarter of 2023. The company further said that, nearly 100,000 communities are using its platform actively, which accumulates to almost 1 billion posts.
Reddit’s US IPO filing also reveals that the previous year had been for the social media platform in terms of commercial success, as it narrowed its net losses to $90.8 million in 2023. While it also reported a revenue growth of $804 million, up from $666.7 million a year back.
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The Deal
Earlier on Wednesday, Reuters reported that Reddit had struck a deal with Google’s parent company Alphabet to make its content available for the search engine to train on the giant artificial intelligence models. The contract is worth more than $60 million each year, according to the sources.
In 2021, Reddit was valued around $10 billion at the close of a funding round, which makes it unclear as to what will be the aim of the San-Francisco based social media platform for its valuation in its upcoming US IPO.
Reuters reported that the IPO is expected to see nearly 10% of its stock sales. The IPO filing also shows that the CEO of Reddit, Steven Huffman is entitled to Class B common stock that will be issued upon achieving a preliminary condition – which is a market capitalization of $5 billion after the IPO, which it is expected to achieve from the get go.
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Growth Prospects
While Reddit was also launched around the same time as other social platforms like Meta and X, previously known as Twitter, its user base remains far smaller than its competition. Reddit’s growth numbers also sound muted compared to the larger social platforms as the company has been struggling over the years to monetize the platform.
One of the concerns is the approach Reddit has been following to moderate its content, which has been a concerning point for the advertisers, and faces a tough competition for advertising with TikTok and Facebook.
Despite all these concerns, Reddit has been able to build a loyal customer base, with the power to start rallies in the meme-stocks in the past few years, most famously in 2021, when retail traders teamed up to spark a rally in the shorted stocks like GameStop and AMC Entertainment Holding.
Reddit was founded in 2005 by Steve Huffman and Alexis Ohanian and got backed by several investors from venture capital giant Andreessen Horowitz and China’s tech giant, Tencent Holdings, to Rapper Snoop Dogg.
In recent years it has been making strong efforts to attract the youth through its acquisition of tikTok’s rival, Dubsmash in 2020, but couldn’t cash on it. The company had been planning its IPO since 2021, but wasn’t able to execute it due to tough economic conditions and poor performance of the technology based companies.
This time it has approached Morgan Stanley and Goldman Sachs as the lead underwriters for the US IPO, with more than a dozen banks in the group.
