Online community Reddit filed for an IPO today. This long-awaited S-1 filing signals its move into the public markets amidst a wave of richly valued technology startups and private companies seeking an exit this year.
The timing of Reddit’s IPO comes as no surprise.
The company has a complex history, having been sold in its early stages, only to later be spun back out. Today, Reddit approaches the public markets with over $800 million in revenue in 2023, up from $666.7 million in 2022.
Despite its revenue growth, Reddit is yet to achieve profitability on both a GAAP and adjusted basis, and is still consuming cash for its operations. However, the company is making progress in reducing its net loss and negative adjusted EBITDA figures.
Reddit raised more than $1 billion while private, including a $410 million Series F in 2021 and a smaller $368 million Series E earlier that year, which pushed its valuation to $10 billion.
In a unique move, Reddit plans to reserve shares for 75,000 of its users at its IPO price before it begins trading, a privilege typically reserved for large investors.
Reddit’s IPO filing coincides with a reported deal with Google, estimated to be worth about $60 million per year, providing a significant tailwind for its 2024 results. The company is also exploring new revenue sources by granting access to its platform data to third parties.
The company is experiencing impressive user base growth, with daily active unique users climbing 27% in the final quarter of 2023. Reddit is also making strides in using machine learning and prediction models to enhance its advertising revenue.
Reddit aspires to capitalize on its user growth with potential substantial revenue growth from advertising, estimating its total addressable market for advertising alone to be $1.4 trillion globally.
If Reddit’s IPO is successful, it could encourage other late-stage private-market tech companies to go public, providing liquidity in the market for both venture capital reporters and investors.
