Reddit Plans to Launch IPO and Sell 10 Percent of Its Shares in March 2024
Reddit set to go public soon
Reddit is all set to launch its initial public offering (IPO) in March 2024. Reddit first revealed its plan to launch its IPO more than three years ago and it's finally all ready to go public. Reddit has seen a lot in the past two years, from blackout to charging for APIs that triggered a wave of talk. Now, it's time for Reddit to finally go public. However, we can't say for sure as the company has refused to comment on it as of now.
It would be the first major IPO since social media company Pinterest went public back in 2019. The company is looking to sell around 10% of its shares. According to Reuters, there's a chance that the IPO plans could get postponed which has also happened in the past. The report comes nearly two months after Bloomberg reported that Reddit had plans for an initial public offering. The company had also submitted a draft registration statement with the Securities and Exchange Commission to go public back in December 2021, but those plans were postponed.
Reddit also faced some scrutiny when it decided that it would charge companies for access to its API. This move unsettled many who relied on the platform's application programming interface.
How much is Reddit valued at?
Valuation is still open to speculation. However, we do know that at the time of the confidential IPO filing back in 2021, the company's valuation was somewhere around $10 billion which was based on the fundraising round which happened in August of 2021, per Reuters. However, later it was reported that Fidelity, which was leading the round in 2021 had slashed the estimated worth of its investment to $16.6 million which was down by 41.1% from the $28.2 million. According to Reuters, the company has generated more than $800 million in advertising revenue in 2023. This means that the revenue is up by 20% but still isn't close to breakeven.
Reddit has grown since its inception, but without profit
There's no denying the fact that the company has grown since it first launched back in 2005. The world saw the platform overtake its early competitors such as Digg. The platform currently boasts more than 430 million monthly active users, 50 million daily visitors, 1,000,000 active subreddits, and 50 billion monthly views, per Seeking Alpha.
Most of the company's revenue is attributed to its advertising. The company has seen significant growth in its advertising revenue over the years. While that sounds impressive, Motley Fool notes that Twitter had 187 million daily users at that time and generated $3.5 billion in revenue, and Snap which had 319 million users at the end of 2021 and $4.1 billion in revenue. Reddit is still unprofitable and investors do not know if the company will be able to achieve profitability.
When Reddit goes public, should I buy its IPO?
Truth be told, Reddit is competing with platforms like Alphabet, Meta, and Amazon which are the titans of the digital era. Tech stocks like these have fallen out of favor over the years which is probably the reason why Fidelity Investments slashed their initial valuation. While Reddit is not going anywhere, we do not know if buying an IPO is a great idea. It does appear to be a stock that you should not bet your money on, at least for now.