Reddit Finally Files for IPO, Gives Redditors First Tips on Buying Stock

Reddit has officially gone public. THE the social media platform finally filed its initial public offering (IPO) with the Securities and Exchange Commission on Thursday, ahead of its expected stock market debut in March.

It also announced that it was reserving certain shares specifically to sell to its users and moderators. Whether they actually want to buy them is another question.

Reddit shares will be listed on the New York Stock Exchange under the symbol RDDT, but exactly how many will be up for grabs has not been determined. Reddit’s filing is the first significant social media IPO since Pinterest in 2019, with the company scrambling to go public since 2021. While Reddit has continued to push back such plans due to factors including fluctuation markets and high interest rates, this week’s IPO is a strong indication that it is finally ready to take the plunge.

“We are going public to advance our mission and become a stronger company,” Reddit co-founder and CEO Steve Huffman wrote in an open letter included in the filing.. “We hope the IPO will also bring significant benefits to our community.”

Interestingly, Reddit’s IPO filing also revealed that OpenAI CEO Sam Altman is one of the company’s largest shareholders, with 8.7% of the company’s shares. He also has 9.2 percent of the vote, significantly more than Huffman’s 3.5 percent. Altman served on Reddit’s board of directors for seven years previously resignation in January 2022.

Reddit has a deficit of $716.6 million

Thursday’s filing acknowledges that Reddit has “suffered net losses since [its] creation”, losing $90.8 million last year and $158.6 million the year before. By the end of 2023, the company had accumulated a deficit of $716.6 million. It is unlikely That daunting figure will drop significantly anytime soon, especially if Reddit’s cost-cutting efforts and revenue-generating projects don’t bring in enough to offset its growing operational costs.

However, Reddit noted that its 2023 revenue is up 21% from 2022, so at least the bleeding appears to be slowing. The company also plans to increase its revenue through several means.

“We have ample opportunities to grow both the platform and the business, the latter through advertising, monetization of commerce on the platform, and data licensing,” Huffman wrote, later adding that he expects Reddit data to be “a key element” in future training. generative text AI models. “Our work to make Reddit faster, easier to use, easier to moderate and govern, and easier to navigate and find relevant communities is driving growth today and will continue to be our priority going forward. ‘future.”

Users have already started to see the impact of the financial changes Reddit has made over the past few months – and many have been incredibly unpopular. Last week, Bloomberg reported that Reddit had signed a $60 million content licensing deal allowing its data to be used to train AI. In September, Reddit removed the ability to opt out of ad personalization.

Perhaps most infamously, last year Reddit began charging developers for access to its application programming interface (API). The widely ridiculed decision prompted many of its moderators to shut down their subreddits in protest, although Reddit eventually forced them to reopen by threatening to remove volunteers. This has caused catastrophic damage to the relationship between Reddit and its moderators, widening a divide that doesn’t appear likely to heal any time soon.

Given this, many moderators will likely be less enthusiastic about acquiring Reddit shares than they would have been a few years ago. The moderators’ protest also had enough of an impact that Reddit cited and noted it as a risk in its IPO filing.

“While these activities have not historically had a material impact on our business or operating results, similar actions by moderators and/or their communities in the future could have a negative impact on our activities, our results of operations, our financial position and our prospects”, we can read in the press release. deposit.

how to get Reddit shares only on Reddit

Even though Reddit will offer its users a first chance to buy its stock, that doesn’t mean you can just show up on Wall Street and show someone your profile. A percentage of the shares are reserved for a directed sharing program and will be offered directly to “eligible Reddit users and moderators” at an initial public offering price to be determined.

“Our users have a deep sense of ownership over the communities they create on Reddit,” Huffman wrote. “We want that sense of ownership to be reflected in real ownership, for our users to be our owners.”

To be eligible, you must be over 18, live in the United States, and have created a Reddit account by January 1. You must also be “in good standing” on the platform and have never worked for Reddit.

Eligible users will be invited to purchase Reddit shares based on a six-tier priority system, with Redditors grouped based on their “community contributions.” Average Redditors will be rated based on their karma – a reputation score dictated by other users’ upvotes and downvotes on their posts – while moderators will be rated based on the work they’ve done.

Level 1 offers will be offered to “certain users and moderators identified by [Reddit] who have contributed significantly to Reddit community programs. “Levels 2 to 5 will then move from users with 200,000 karma and moderators who have performed a minimum of 5,000 moderator actions, to those with 25,000 karma and 500 moderator actions. Finally, level 6 will include “all other eligible users and moderators.

It can be exciting to feel like you’re being offered an exclusive investment opportunity. Still, no matter how many hours you’ve spent devouring articles on r/AITA, you should always do your research before investing in a company. Important financial decisions should never be taken lightly, no matter how good your Reddit karma is.