Reddit, Social Media Giant Behind GameStop Saga, Plans $10B March IPO

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Social media player Reddit is set to launch its initial public offering in March, marking a significant move after three years of contemplation.

Reddit is an American social news aggregation, content rating, and discussion website.

Registered users submit content to the site, such as links, text posts, images, and videos, which other members then vote up or down.

The San Francisco-based company, valued at approximately $10 billion in 2021, is gearing up to sell about 10% of its shares during the IPO, Reuters noted, citing insider sources.

The meme stock rally in 2021, with Gamestop (NYSE: GME) stock at the center, took off mainly on Reddit with the r/wallstreetbets subreddit. Social media plays a big role in investing with young investors.

Reddit's IPO, the first major for a social media company since Pinterest's debut in 2019, will unfold against intense competition for advertising revenue from platforms such as TikTok and Meta Platforms Inc (NASDAQ: META) (Facebook).

The company filed for its IPO confidentially in December 2021. Plans include making its public filing in late February, initiating a roadshow in early March, and completing the IPO by the end of March.

However, Reuters highlights caution that the timeline could be subject to delays, as has happened in the past.

Reddit's IPO Strategy and Financial Outlook

  • Founded in 2005 by Steve Huffman and Alexis Ohanian, Reddit primarily generates revenue through advertising and offers premium access for a monthly fee.
  • Despite a $10 billion valuation, the company has yet to turn a profit, citing investments in the platform and lower user engagement with advertising compared to other social media platforms.
  • In 2023, Reddit is expected to generate over $800 million in advertising revenue, signaling a 20% Y/Y increase, as reported by The Information last month.
Market Dynamics and Rivals

  • Large social media stocks, including Facebook and Snap Inc (NYSE: SNAP), have rebounded in the past year amid a broader rally in technology stocks.
  • Meta Platforms' shares tripled in value over the past 12 months.
  • Snap stock experienced a 60% increase.
Reddit's IPO, if successful, will be closely watched as it navigates user sentiment and industry competition.