In what’s poised to be one of the biggest initial public offerings of the year, Reddit disclosed financial details of its forthcoming IPO, through which it’s aiming to raise as much as $748 million.
On Monday, in an update to its S-1 filing with the SEC, Reddit said it and its investors will offer 22 million shares, expected to be listed at an IPO price of between $31 and $34 per share. The offering would give Reddit a top valuation of about $6.4 billion — less than the $10 billion it had been valued at in 2021 after a major round of funding. based on the midrange price of $32.50 per share, Reddit said it expects to receive net proceeds from the IPO of about $450.9 million.
Reddit plans to use the money raised from the IPO for “general corporate purposes” as well as potentially to “in-license, acquire or invest in complementary technologies, assets or intellectual property.” The company noted that it has “no current commitments for any material acquisitions or investments at this time.”
Reddit intends to list its Class A common stock on the New York Stock Exchange under the ticker symbol “RDDT.”
The company is offering 15.28 million shares of its Class A common stock and selling stockholders are offering an aggregate of 6.72 million shares. In addition, Reddit’s underwriters have reserved up to 1.76 million shares of stock (8% of the shares in the offering), for sale at the IPO price through a directed share program to “eligible users and moderators on our platform” as well as certain board members and “friends and family members of certain of our employees and directors.”
Reddit previously said it would grant users who have “meaningfully contributed to Reddit community programs” the chance to buy shares in the company at the IPO price. According to Reddit, users and moderators who created an account on or before Jan. 1, 2024, are potentially eligible for the directed share program. Those will be invited to participate in six phased “priority tiers,” based on that participant’s contributions to Reddit. Shares purchased through the directed share program will not be subject to the terms of the lock-up agreement or market standoff restrictions.
In its original IPO filing last month,Reddit reported 2023 revenue of $804.0 million, up 21% year over year, and a net loss of $90.8 million in 2023, compared with a $158.6 million loss the year prior. In December 2023, Reddit had more than 500 million visitors and in the fourth quarter had an average of 73.1million daily active unique users worldwide. The company had 2,013 full-time employees as of the end of 2023, up from 1,942 a year earlier.
Reddit said that in January 2024 it entered into “certain data licensing arrangements” totaling $203million with terms ranging from 2-3 years, with a minimum of $66.4 million of revenue to be recognized in calendar year 2024. “We believe our growing platform data will be a key element in the training of leading [artificial intelligence] large language models (‘LLMs’) and serve as an additional monetization channel for Reddit,” the company said.
The company didn’t disclose which AI company or companies it had licensed data to, but it’s worth noting that OpenAI CEO Sam Altman is a major shareholder, owning 8.7% of Reddit’s current outstanding shares. According to the filing, Advance Publications (parent of Condé Nast, which formerly owned Reddit) owns 30.1% of outstanding shares, while China’s Tencent Holdings owns and 11% and Fidelity owns 8.4%.
Reddit CEO Steve Huffman owns 3.1% of the company’s outstanding shares and Reddit COO Jen Wong holds 1.5%, per the filing. Huffman’s compensation package for 2023 was worth $193.2 million, which included salary of $341,346, stock awards worth $98.3 million and stock options valued at $93.8 million. Wong’s total comp of $92.5 million included a base salary of $583,820, stock awards of $45.7 million and stock options worth $45.7 million.
The company in December 2021 confidentiallysubmitted a draft registration statementwith the SEC for a proposed IPO. Reddit was acquired by Condé Nast in 2006, soon after it launched in 2005. In 2011, Condé Nast spun out the site, while parent Advance Publications retained a minority stake. Other investors in Reddit include Vy Capital, Sequoia Capital and Andreessen Horowitz.
