Reddit IPO Will Become ‘Front Page of the Internet’

  • The “front page of the Internet” is finally ready to be made public.
  • Reddit stock began trading on the New York Stock Exchange on Thursday.
  • Here’s what you need to know about its IPO as the company targets a valuation of $6.4 billion.

Reddit may have proclaimed itself “the front page of the internet” nearly two decades ago, but its moment to face the public has only just arrived.

The social media forum is scheduled to debut on the New York Stock Exchange on Thursday, a milestone for the company founded in 2005 by a pair of college roommates at the University of Virginia.

At the time, its co-founders Steve Huffman and Alexis Ohanian (who went by spez and kn0thing, respectively) were working under veteran Silicon Valley investor Paul Graham. (Paul Graham) built a social platform just as Mark Zuckerberg took Facebook into the mainstream.

After bringing on board the late computer programmer Aaron Swartz, then known as the developer behind RSS feeds, the company was poised to capture the attention of people who used news aggregation services like Digg by offering its own service.

The launch of the Reddit subreddit in 2008 was a turning point, with communities growing around interest-based groups on the site. However, anonymous users roam freely without oversight, giving it a reputation as social media’s underbelly.

While Reddit grew through its 2006 sale to media giant Condé Nast, it struggled to find a path to profitability before being spun off to parent company Advance Publications.

Although it took some time, Reddit finally seems ready to prove its doubters wrong.

On Wednesday, Reddit priced its shares at $34, at the top of that range and implying a valuation of $6.4 billion. The IPO will be one of the largest in recent years, testing investors’ appetite.

There is a lot of uncertainty surrounding the preparations for the day.

Although Reddit’s platform was founded in a similar age to rivals such as Facebook and

lower losses

Meanwhile, the broader IPO market has suffered a drought in recent years as uncertain market conditions threaten ambitious valuation targets. Investors must weigh Reddit’s current health to determine whether its target valuation is valid.

Reddit revealed in its IPO filing last month that revenue grew about 21% last year, while its net loss at the end of 2023 was $90.8 million, down from $158.6 million the previous year.

It appears these losses haven’t deterred investors just yet. Reuters reported on Sunday, citing unnamed sources, that Reddit’s IPO was four to five times oversubscribed.

you promised

Still, as my colleague Peter Kafka points out, this is still a lot of money for Reddit to burn. To some extent, the company has been investing heavily in engineering talent: about $439 million, or 55% of its revenue, is spent on research and development, including engineer salaries.

There’s no doubt that part of investors’ bet is that R&D spending will focus on a current technology: artificial intelligence.

In its S-1 filing with the U.S. Securities and Exchange Commission, Reddit positioned itself as an integral part of generating the artificial intelligence boom. It describes its content as “a foundational part of how many leading large language models (“LLMs”) have been trained.”

Reuters reported last month that Reddit was trying to monetize this content by striking a licensing deal with Google to feed its data into the search giant’s artificial intelligence models for $60 million a year.

That could boost those with stakes in the IPO, such as OpenAI CEO Sam Altman, whose Reddit stock could be worth between $51.4 million and $56.4 million.

Reddit plans to raise about $750 million by listing 22 million shares, giving loyal Reddit users a chance to buy shares in addition to the usual institutional investors.

The front page of the Internet is about to become even more eye-catching.

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