Social media giant Reddit has taken a step towards going public, filing an S-1 statement with the Securities and Exchange Commission (SEC) as it eyes an initial public offering (IPO) on the New York Stock Exchange, with the proposed symbol RDDT.
Financial Snapshot: Revenue, Losses, and User Base
According to the disclosed document, Reddit reported a substantial $804 million in revenue in the past year, primarily driven by advertising, which constituted a staggering 98% of the total income. However, the company found itself in the red, with a net loss of $90.8 million in 2023. Despite this, Reddit boasts an impressive user base, with 267.5 million weekly active users, over 100,000 active communities, and a whopping 1 billion publications.
Exclusive Investment Opportunity for Active Users
In an unusual twist, Reddit is extending a unique opportunity to a select group of its most active users, including moderators and those with high karma scores. Traditionally reserved for institutional investors, this move allows certain community contributors to purchase shares in the IPO at a presumably lower price before the public offering.
Tiered System for Share Distribution
Reddit’s share distribution strategy is tiered, beginning with users and moderators recognized for significant contributions to community programs. Following this initial tier, individuals with a karma score of at least 2,000 and those who have undertaken a minimum of 5,000 moderator actions will be invited to partake in the share purchase opportunity. The company has earmarked 1.3 million shares of its Class A stock to fund community-related programs that empower Redditors to bring their ideas to fruition.
Monetization Strategy: Data Licensing and AI Training
Reddit outlines components of its monetization strategy, pointing to data licensing and the training of artificial intelligence models. Notably, the company inked a deal with Google to train AI systems, anticipating a substantial $60 million in annual revenue from the partnership.
OpenAI CEO’s Significant Investment
Adding a layer of intrigue to Reddit’s financial narrative is the revelation that Sam Altman, CEO of OpenAI and a rival company, has invested over $60 million in Reddit stock. Holding a noteworthy 9.2% of Reddit’s voting power, Altman initially invested in Reddit in 2014 during his tenure as the president of Y Combinator. His investments continued through 2021, establishing a substantial equity stake in the social media platform.
As Reddit pioneers a path towards IPO, the inclusion of its active user base in the investment journey sets a precedent for community engagement in the financial realm. The story unfolds against the backdrop of financial figures, strategic partnerships, and a noteworthy investment from a rival CEO, making Reddit’s journey to the public market one that transcends the conventional norms of initial public offerings.
Source: https://www.cnbc.com/2024/02/22/openai-ceo-sam-altman-stands-to-net-millions-as-reddit-goes-public.html