4 Key Takeaways From Reddit’s IPO Filing

Reddit filed for an initial public offering (IPO) on the New York Stock Exchange (NYSE) to trade under the symbol “RDDT” this week. The company first pursued going public in late 2021.

Thursday’s filing with the Securities and Exchange Commission (SEC) offered insight into Reddit’s financials and business; its investments in cryptocurrency; artificial intelligence (AI) pioneer and OpenAI CEO Sam Altman’s investments in the company; and shares reserved for the platform’s users.

First Look at Business Metrics

The S-1 filing offers potential investors an initial look into the company’s financials and other key business metrics. Steve Huffman, Reddit co-founder and chief executive officer (CEO), said the company’s business opportunities include “advertising, monetizing commerce on the platform, and licensing data.”

Reddit reported its 2023 revenue was $804 million, representing 21% growth from 2022’s $666.7 million. The company said its gross margin for 2023 was 86%, up from 84% in 2022. Net loss was $90.8 million in 2023, down from a $158.6 million loss the previous year.

The filing showed Reddit’s user base has grown, reporting 73.1 million daily active users in the fourth quarter of 2023, up 27% year over year.

Reddit Invested in Crypto

The company reported that it has crypto investments, specifically Bitcoin (BTC) and Ether (ETH).

Reddit said it invested “some of [its] excess cash reserves in Bitcoin and Ether and also acquired Ether and Matic as a form of payment for sales of certain virtual goods,” which it “may continue to do in the future.”

The company didn’t disclose a specific amount of its cryptocurrency investments, but noted that the net carrying value was “immaterial.”

OpenAI’s Sam Altman Among Major Stakeholders

Reddit disclosed that Sam Altman, CEO of ChatGPT maker OpenAI, is among those holding more than 5% of its capital stock.

The company reported that entities associated with Altman bought more than a million shares at an aggregate purchase price of more than $60 million. Altman’s investment gained him 9.2% voting power, the filing indicated.

Reddit noted that licensing its data for machine learning and AI training could present an opportunity for the business, and said the company has “negotiated data agreements with a small number of partners.” It added “all of the contract value associated with our licensing revenue is derived from one of our partners,” but did not name any specific firms.

Some Shares Are Reserved for Redditors

The social media company said it is “committed to providing users and moderators with an opportunity to participate in this offering.” Reddit has set aside an unspecified but “significant” number of shares for its users and moderators, the company said.

Those who made an account before Jan. 2 are potentially eligible for the share program, the filing said. The program will come in six phased priority tiers, with each eligible participant being assigned “a tier based on that participant’s contributions to Reddit” measured by Redditors’ karma, the platform’s metric of a user’s community contributions.