Reddit's IPO is set to make the 'front page of the internet' public

Reddit CEO Steve Huffman is about to bring the social-media forum public. Greg Doherty/Getty Images

• The “front page of the internet” is finally ready to go public.
• Reddit shares start trading on the New York Stock Exchange on Thursday.
• Here’s what you need to know about its IPO as it targets a $6.4 billion valuation.

Reddit might have been self-anointed the “front page of the internet” almost two decades ago, but its time to face the public has just arrived.

The social-media forum is set to list Thursday on the New York Stock Exchange — marking a milestone for the company created in 2005 by a pair of college roommates from the University of Virginia.

Back then, Steve Huffman and Alexis Ohanian, its cofounders who’d go by the usernames spez and kn0thing, respectively, worked under the stewardship of the veteran Silicon Valley investor Paul Graham to build a social platform just as Mark Zuckerberg was taking Facebook mainstream.

After bringing Aaron Swartz on board — the late computer programmer then known as a developer behind RSS feeds — the company was ready to capture the attention of people using news-aggregation services like Digg by offering its own take.

The launch of subreddits in 2008 made for a turning point as communities grew around interest-based groups on the site. However, the freedom given to anonymous users to roam without oversight has left it to contend with a reputation of being social media’s underbelly.

While it grew through a sale to the media giant Condé Nast in 2006, before being spun out to its parent company, Advance Publications, Reddit has struggled to find a path to profitability.

Though it has taken its time, Reddit finally seems ready to prove its doubters wrong.

On Wednesday Reddit priced its shares at $34, at the top of the range, implying a $6.4 billion valuation. The IPO is set to be one of the largest listings in recent memory in a test of investor appetite.

There’s a lot of uncertainty in the run-up to the day.

Despite being created at a similar time to rivals such as Facebook and X, Reddit’s platform has an average of 73.1 million daily active users, a far cry from the roughly 2 billion and 245 million daily users those two services have respectively.

Lower losses

Meanwhile, the IPO market more broadly has suffered a drought in recent years as uncertain market conditions have threatened to chop down ambitious valuation targets. Investors must weigh Reddit’s current health to determine whether its target valuation is valid.

In its IPO filing last month, Reddit revealed that revenue had grown by about 21% last year, while its net loss at the end of 2023 was $90.8 million, down from $158.6 million the previous year.

Those losses haven’t dissuaded investors just yet, it seems. Reddit’s IPO is between four and five times oversubscribed, Reuters reported Sunday citing unnamed sources.

AI promise

Still, as my colleague Peter Kafka has noted, that’s still a lot of money for Reddit to burn. In part, it’s been spending heavily on engineering talent: about $439 million, or 55% of its revenue, went to research and development, which included engineer salaries.

No doubt, part of the bet investors will be making is that the R&D spend is focused on the technology of the moment: artificial intelligence.

In its S-1 filing with the Securities and Exchange Commission, Reddit positioned itself as an indispensable component of the generative-AI boom. It described its content as a “foundational part of how many of the leading large language models (“LLMs”) have been trained.”

Reuters reported last month that Reddit had sought to monetize that content by striking a licensing deal with Google to make its data available to the search giant’s AI models for $60 million a year.

That could boost those with a stake in the IPO, like OpenAI CEO Sam Altman, whose holding of Reddit shares could be worth between $51.4 million and $56.4 million.

Reddit plans to list 22 million shares raising about $750 million, with loyal Redditors getting a chance to purchase stock in addition to the usual crowd of institutional investors.

The internet’s front page is about to become much more visible.

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