Reddit files for a list of NYSE IPOs under the ticker RDDT

The social media company Reddit filed its IPO prospectus with the Securities and Exchange Commission on Thursday after years of experience. The company plans to trade on the New York Stock Exchange under the symbol “RDDT.”

Its market debut, expected in March, will be the first major tech IPO of the year. This is the first social media IPO since then Pinterest went public in 2019.

Reddit said it had $804 million in annual sales for 2023, up 20 percent from the $666.7 million it brought in the year before, according to the filing. The social networking company’s core business relies on online advertising sales derived from its website and mobile app.

The company, founded in 2005 by tech entrepreneurs Alexis Ohanian and Steve Huffman, said it has suffered net losses since inception. It reported a net loss of $90.8 million for the year ended Dec. 31, 2023, compared with a net loss of $158.6 million the year before.

Reddit is one of the most visited websites in the US, according to analyst firm Semrush, but has struggled to build an online advertising business comparable to that of tech giants such as parent Facebook Meta and Google Parent Alphabet.

Reddit has more than 100,000 communities, 73 million average daily active unique users, or DAUq, and 267 million average weekly active unique users, according to the filing. As of the fourth quarter of 2023, Reddit’s US average revenue per user, or ARPU, was $5.51, down from $5.92 a year earlier. The company’s global ARPU was $3.42, down 2% year over year from $3.49.

Reddit said that by 2027, it estimates “the total global addressable advertising market, excluding China and Russia, to be $1.4 trillion.” Reddit said the current addressable advertising market is $1.0 trillion, excluding China and Russia.

The company is upgrading its search capabilities and plans to “more fully address the $750 billion opportunity in search advertising that S&P Global Market Intelligence estimates will be in the market by 2027.”

Reddit said it plans to use artificial intelligence to improve its advertising business and that it expects to open up new revenue channels by offering tools and incentives to “drive continuous creation, improvements and commerce.”

It is also in the early stages of developing and monetizing a data licensing business in which third parties will be allowed to access and search data on its platform.

For example Google OnThursday announced an expanded partnership with Reddit that will give the search giant access to the company’s data, among other applications, to train its AI models.

In June, several prominent Reddit moderators locked down subreddits as part of a blackout to protest the company’s decision to increase the price some third-party developers pay to use its application programming interface, or API, depending on their usage. . At the time, Reddit said the pricing change was necessary because many large tech companies use data to train large language models.

“In January 2024, we entered into certain data licensing agreements with an aggregate contract value of $203.0 million and terms ranging from two to three years,” Reddit said of its data licensing business. “We expect a minimum of $66.4 million of revenue to be recognized in the year ending December 31, 2024 and the remainder thereafter.”

Reddit appears to be exploring a business strategy similar to that of Roblox, which derives most of its revenue from digital sales on its social gaming platform and online retailer eBay. The company wants to introduce more features to create a consumer economy that could include gaming, according to the filing. Reddit said it currently has informal exchanges of physical and digital goods and services that can create another line of revenue.

Reddit will offer three classes of shares with different voting shares. A Class A share will have one vote per share. Class B shares will have 10 votes per share and may be converted at any time into one share of Class A stock. Class C shares shall have no voting rights.

Reddit said its non-employed moderators, known as Redditors, can participate in the company’s IPO offering through its “directed sharing program.” As such, Reddit said there is a possibility that “individual investors, retail or otherwise, may represent a greater proportion of the investors participating in this offering than is typical for an initial public offering.” Reddit said it averaged over 60,000 daily active moderators in December 2023.

“These factors may cause volatility in the market price of our Class A common stock,” the company warned.

As for the risks, Reddit said its daily active unique figures “may fluctuate or decline in one or more markets from time to time due to various factors.”

“For example, although we saw increased growth in our user base during the COVID-19 pandemic, we experienced lower levels of DAUq growth and DAUq decline as the effects of the COVID-19 pandemic subsided,” it said the documentation. “DAUq has also declined in the past in periods following usage peaks around certain global events, such as the start of the Russia-Ukraine conflict in the three months ended March 31, 2022, and cultural trends, including video game releases such as e.g. Elden Ring in the three months ended March 31, 2022 and traffic related to r/wallstreetbets in the three months ended March 31, 2021.”

Reddit first filed a confidential draft of its public offering prospectus with the Securities and Exchange Commission in December 2021.

Reddit has raised about $1.3 billion in funding and has a $10 billion valuation, according to deal-tracking service PitchBook. Publishing giant Condé Nast bought Reddit in 2006 and then spun it off as an independent company in 2011.

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