Reddit files publicly for IPO, trumpeting AI deals as revenue source and listing OpenAI’s Altman as major shareholder

Reddit files publicly for IPO, trumpeting AI deals as revenue source and listing OpenAI’s Altman as major shareholder

Reddit files publicly for IPO, trumpeting AI deals as revenue source and listing OpenAI’s Altman as major shareholder

The San Francisco-based social media company will not disclose proposed terms for the IPO, including its valuation in a listing, until a later filing.

The company has been advised to consider a valuation of at least US$5 billion in an IPO and could begin marketing the shares as soon as March, Bloomberg News previously reported.

In its filing, Reddit said it plans to grow its business in part through data licensing deals with artificial intelligence companies, in addition to work on its own AI products. Those licensing deals will allow the company to use its trove of content as bigger revenue generator.

On Thursday, Reddit announced a deal with Alphabet’s Google that included AI training, but it has not announced a partnership with Altman’s OpenAI.

“Reddit’s vast and unmatched archive of real, timely, and relevant human conversation on literally any topic is an invaluable data set for a variety of purposes, including search, AI training, and research,” Reddit co-founder and current CEO Huffman wrote in a letter included in the filing.

Reddit has signed a deal with Google that allows the search giant to use posts from the online discussion site to train its AI models. Photo: AP Photo

Meme-Stock Icon

Reddit, founded in 2005, averaged 73.1 million daily active unique visitors in the fourth quarter, according to the filing. It became an icon of the so-called meme-stock era after a forum on the site, WallStreetBets, jolted the stock market.

“Advertising is our first business, and advertisers of all sizes have discovered that Reddit is a great place to find high-intent customers that they aren’t able to reach elsewhere,” Huffman said in the filing.

“Advertising on Reddit is rapidly evolving, and we are still in the early phases of growing this business.”

The company will set aside shares in the IPO to be bought by users and moderators who created accounts before January 1, according to the filing. The number of shares to be allotted to them will be disclosed later.

Reddit had net loss of US$90.8 million on revenue of US$804 million in 2023, compared with a net loss of US$158.6 million on revenue of US$666.7 million a year earlier, according to the filing.

Its largest shareholder is Advance Magazine Publishers with 34 per cent of the voting power before the offering, the filing shows.

The offering is being led by Morgan Stanley, Goldman Sachs, JPMorgan Chase and Bank of America. The company plans for its shares to trade on the New York Stock Exchange under the symbol RDDT.

Reddit co-founder Alexis Ohanian with wife, tennis player Serena Williams, at an event in Los Angeles, California, in 2021. Photo: Reuters

Market Test

The company is a high-profile addition to the year’s roster of newly and soon-to-be public companies. Thirty-four firms have raised more than US$7.1 billion in IPOs on US exchanges since January 1, according to data compiled by Bloomberg. The biggest of those listings was the US$1.57 billion offering by Amer Sports in January.

Shares of those companies have gained more than 14 per cent on a weighted average basis. That contrasts with Arm Holdings and three other companies that went public in September and October and fell below their IPO prices, putting a quick end to an anticipated rebound in listings after a two-year slowdown.

Arm, whose US$5.23 billion offering was the biggest of the year, has since rocketed 154 per cent. Excluding Arm, though, the 166 companies that raised about US$21 billion last year have gained an average of only 13 per cent, the data show.

Reddit could be 2024’s first major test of the market for a technology start-up backed by venture capital. The company, which has raised US$1.38 billion, was valued at US$10 billion after a 2021 financing round, according to data provider PitchBook.

Its listing will be watched closely by IPO candidates such as Microsoft-backed data security start up Rubrik and healthcare payments company Waystar Technologies.

Source link