The Newz Radar
Social media giant Reddit is gearing up for its long-anticipated initial public offering (IPO) in March, marking the sector’s first major debut since Pinterest in 2019.
This is based on a Reuters report.
Reddit, valued at approximately $10 billion in a 2021 funding round, faces fierce competition from platforms like TikTok and Facebook for advertising revenue.
The IPO would also be a litmus test for Reddit users’ willingness to support the company’s stock market entry, considering the platform’s history of fuelling “meme” stock rallies.
The San Francisco-based company, founded in 2005, plans to make its public filing in late February, initiate its roadshow in early March, and complete the IPO by the end of the same month.
Reddit, seeking to sell about 10 per cent of its shares, will decide on the IPO valuation closer to the listing.
While these plans could face delays, as seen in the past, sources caution that Reddit’s IPO aspirations might encounter hurdles.
Known for its niche discussion groups, Reddit generates revenue primarily through advertising and offers premium access for a monthly fee. Despite its popularity, the platform has yet to turn a profit.
Reddit CEO Steve Huffman acknowledged the losses, attributing them to investments in the platform and lower user engagement with advertising compared to other social media.
The company held off on its IPO plans until it neared profitability, also navigating market volatility that disrupted IPOs in recent years.
The IPO move comes after Reddit expected to generate over $800 million in advertising revenue in 2023, reflecting a 20 per cent increase from the previous year.
While the company looks to tap into its vast user base for financial gains, it introduced charges for accessing its application programming interface (API), causing discontent among users relying on third-party apps.
This strategic shift signals Reddit’s effort to monetise its services beyond traditional advertising models.
Despite Reddit’s delayed profitability, the broader social media sector has experienced a rebound, driven by a rally in technology stocks.
Meta Platforms, operating Facebook, witnessed a threefold surge in shares over the past 12 months, while Snap’s shares rose by 60 per cent during the same period.
