Reddit Plans IPO Launch in March Amid Stiff Social Media Competition
Anticipating its IPO, Reddit Faces Critical Test of User Loyalty Amidst Fierce Social Media Landscape.
Social media giant Reddit is gearing up for its long-anticipated initial public offering (IPO), with plans to debut in March, as disclosed by insider sources. This move comes after over three years of contemplation and positions Reddit for the first major social media IPO since Pinterest's 2019 entrance to the market. The impending listing arrives in a competitive landscape where platforms like TikTok and Facebook vie for advertising dominance.
The IPO not only marks a pivotal moment for Reddit but also tests the loyalty of its user base in supporting the company's stock market debut. Reddit users have been instrumental in fueling various "meme" stock rallies, including those of GameStop and AMC Entertainment Holdings over the past three years.
Having filed confidentially for its IPO in December 2021, Reddit plans to make its public filing in late February, initiate its roadshow in early March, and conclude the IPO by the end of March, according to reliable sources. The San Francisco-based company, valued at approximately $10 billion in a 2021 funding round, intends to offer about 10% of its shares in the IPO, with the final valuation to be determined closer to the listing date.
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While the sources caution that Reddit's IPO plans may face delays, the company's spokesperson declined to comment on these speculations.
Founded in 2005 by Steve Huffman and Alexis Ohanian, Reddit gained prominence for its niche discussion groups and unique voting system where users can "up" or "down" vote content posted by others. Despite generating revenue primarily through advertising and offering premium access for $5.99 per month, the platform is yet to turn a profit, as highlighted by Huffman in a Reddit post last June.
The decision to go public was triggered by Reddit's pursuit of profitability and market conditions. The company, cautious about market volatility and having experienced delays in the past, chose to wait until it neared profitability before initiating the IPO.
The anticipated advertising revenue for 2023 is slightly over $800 million, a growth of over 20% from the previous year. Reddit's move to charge companies for access to its application programming interface (API) drew mixed reactions from users, some of whom rely on third-party apps to access the platform.
As Reddit prepares to join the ranks of publicly traded companies, its performance will be closely watched, especially amid the resurgence of interest in large social media stocks, driven by a rally in technology stocks over the past year. Meta Platforms (Facebook) and Snap have witnessed significant increases in their stock values, reflecting the overall positive trend in the sector.
