Reddit IPO 2024: Everything you need to know
Reddit is a dynamic platform founded in 2005, where users can explore a multitude of topics through community-driven discussions, making it a unique entity in the landscape of social media. As of October 2023, Reddit ranks as the 18th most visited website globally, with the vast majority of traffic coming from the US.
Reddit has been praised worldwide for fostering community engagement and raising awareness for various causes, but it has also been criticized for spreading misinformation. It officially entered the public market with its Initial Public Offering (IPO) on March 21, 2024. Let’s get into the key details surrounding this significant event.
Overview of Reddit IPO
Reddit’s IPO marks a pivotal moment in its history as it transitions from a private entity to a publicly traded company. It raises significant capital while also facing scrutiny from its user base regarding future changes to its community dynamics.
Reddit priced its IPO at $34 per share, and the offering consisted of 22 million shares. The shares began trading on the New York Stock Exchange under the ticker symbol “RDDT”. The stock surged by 48% on its first day and closed at $50.44, which valued the company at around $6.4 Billion.
The IOP raised $748 million for Reddit. The lead underwriters for the Reddit IPO included Morgan Stanley, Goldman Sachs, J.P. Morgan, and BofA Securities, among others.
The reaction from Reddit users has been mixed, as many fear that the platform will prioritize shareholder interests over community engagements, leading to increased advertising and strict content moderation policies. In addition, CEO Steve Huffman acknowledged that retail investors on the platform might influence the stock price, reflecting a new reality for the company as it navigates public ownership.
Reddit’s IPO and User Experience
Implementing the IPO of Reddit has sparked debate among “Redditers” regarding the user experience. Let’s learn the main concerts of users.
- Increased Advertising: As Reddit seeks to enhance profitability post-IPO, users anticipate a surge in advertisements. This may change the browsing experience, making it less organic and more commercialized, similar to trends observed on other social media platforms after their IPOs.
- Content Moderation Dynamics: Users fear that subreddits focusing on controversial or non-mainstream topics could face increased scrutiny or bans if they conflict with corporate interests.
- Leadership Decisions: Users have raised concerns that the IPO could cause issues related to censorship and the platform’s governance, leading to a decline in user trust and engagement.
- Corporate Influence: Redditors fear going public will lead to increased corporate oversight and a shift in priorities from community engagement to maximizing shareholder value.
Reddit funding over the years
Reddit has been able to grow in popularity because of the support and investments it’s received over the years. As a matter of fact, the site has raised a total of $1.3B in funding over 10 rounds. It is clear that the site has been able to find a lot of support from investors over the years.
It has often been cited as one of the most innovative and powerful websites in existence, catching the interest of several investors. Hence, the investments in the site have been a major catalyst for the growth of the website.
| Announced Date | Transaction Name / Funding Round | Number of Investors | Money Raised | Lead Investors | All Investors |
|---|---|---|---|---|---|
| Aug 12, 2021 | Series F - Reddit | 5 | $410M | Fidelity | Catamaran, Quiet Capital, Montauk Ventures, Bienville Capital, Fidelity |
| Feb 8, 2021 | Series E - Reddit | 6 | $367.9M | Vy Capital | Sequoia Capital, Vy Capital, Tencent, Quiet Capital, Puget Sound Venture Club, Andreessen Horowitz |
| Nov 1, 2020 | Secondary Market - Reddit | 1 | — | — | Kjøller |
| Feb 11, 2019 | Series D - Reddit | 4 | $300M | Tencent | Sequoia Capital, Tencent, Fidelity, Andreessen Horowitz |
| Jul 31, 2017 | Series C - Reddit | 14 | $200M | — | Buddy Shakhashir, Scott Belsky, SV Angel, Andreessen Horowitz, Quiet Capital, Edward Lando, Fidelity, Coatue, Bracket Capital, Reshape, Sequoia Capital, Craft Ventures, Vy Capital, Y Combinator |
| Sep 30, 2014 | Series B - Reddit | 16 | $50M | Sam Altman | SV Angel, Jared Leto, Andreessen Horowitz, Calvin Broadus, Rick Marini, Paul Buchheit, Sam Altman, Jessica Livingston, Sequoia Capital, Yishan Wong, 500 Global, Mariam Naficy, A.Capital Ventures, Kevin Hartz, Thrive Capital, Philip Kaplan |
| Dec 3, 2012 | Series A - Reddit | 1 | $1M | — | Initialized Capital |
| Jun 1, 2005 | Seed Round - Reddit | 1 | $100K | — | Y Combinator |
| Jan 1, 2005 | Seed Round - Reddit | 1 | — | — | Heartcore Capital |
| Total Funding | $1.3B |
Financial Projections for Reddit Post-IPO
Reddit’s financial projections Post-IPO indicate a mix of optimism and challenges. Given below are the key insights.
Revenue growth and Financial performance
The 20% revenue growth in 2023 indicates that growth is promising ,especially taken into consideration of the company’s struggles with profitability. Revenue exceeds $800 million in 2023 up from $666 million in 2022.
Despite this revenue growth, Reddit has not yet turned a profit. Company reported a loss of $91 million in 2023, but is an improvement in loss compared to previous year’s $159 million. From this trend it is clear that revenue is growing ,but the path to profitability remains uncertain.
Cash Reserves and Financial Stability
Reddit possesses nearly $1.5 billion in cash and equivalents with no debt positions the company well to sustain its operation. Also this helps to recover the predicted losses in future without any pressures.
Valuation and Market Position
In Reddits IPO on march 21, 2024, it was valued at approximately $6.4 billion, based on an initial public offering price of $34 per share. This valuation is notably lower than the $10 billion valuation it had during a founding round in 2021.
As of now, Reddits’s market capitalization has risen to about $10.68 billion, with shares trading at around $67.67, representing a substantial increase from its IPO valuation.
Also the Reddit IPO was reportedly oversubscribed by up to five times, suggesting high investor confidence in Reddit’s potential for future growth.
Potential Risks and challenges of Reddit IPO
While Reddit’s IPO was well-received, the company faces several risks and challenges as a public company:
- Lack of Profit: Reddit has yet to report a full year of profitability, which could concern some investors.
- Competition: Reddit competes with much larger firms like Alphabet and Meta, which may limit its growth.
- Controversy and API Changes: Reddit has faced controversies, such as its 2023 decision to charge third-party developers for API access, which drove away many moderators.
- Volatility from User Base: Reddit reserved a small portion of IPO shares for its users, leading to increased stock price volatility in the early days of trading.
Need help in launching an IPO for your company?
Reddit has had a great run when it comes to growth, expansion, and experience. With its IPO plans in the pipeline, the company is hoping to create a more stable and developed market for itself. In order to achieve this, the company needs to come up with strong and promising metrics, while they also need to be in sync with the market trends.
If you are looking for services like business valuation, cap table management software, or need help in launching an IPO, Eqvista can be a great option for you. At Eqvista, they strive to offer you comprehensive solutions to complete your business goals and needs.
