Reddit reveals 21% year-over-year revenue growth as it moves forward with long-rumored IPO

Reddit is finally moving forward with the initial public offering it has been planning for more than two years. The social platform’s S-1 filing outlines the terms of its IPO, which will bring in some individual users as investors.

18-year-old Reddit has long harbored Wall Street aspirations. It filed confidentially with the Securities and Exchange Commission in December 2021. At the time, the IPO was scheduled to occur “after the SEC completes its review process, subject to market and other conditions.”

The exact size of the Reddit IPO won’t be revealed until a later filing, but the company co-founded by Steve Huffman, Alexis Ohanian, and Aaron Swartz is expected to reach a valuation of at least $5 billion. That’s good news for Huffman, who currently serves as Reddit’s CEO and holds Class B common stock that is issuable when Reddit achieves a $5 billion market capitalization.

A 2021 funding round put Reddit’s value above $10 billion, and the community-based social hub has grown since then. The S-1 filing included some of Reddit’s 2023 figures: Though the company is not yet profitable, it increased its revenue by 23% year-over-year and reduced its net loss to $90.8 million. Reddit estimated that it averages about 73 million daily active users.

Some of those users will get a chance to be part of the upcoming IPO. To honor the “deep sense of ownership” Redditors possess within their favorite subreddits, some users will be offered stakes through a directed share program. The participants for that program will be chosen based on the karma they’ve accrued through upvoted posts and comments. I guess the value of my “fake internet points

In its S-1 filing, Reddit acknowledged that it’s creating risk by adding users to its investor sheet. The document highlights the r/wallstreetbets community as an example of a “tremendous force for good” that has emerged from Reddit. Later on, however, the filing states that r/wallstreetbets could make Reddit stock unpredictable if the forum’s denizens participate in the IPO.

“Given the broad awareness and brand recognition of Reddit, including as a result of the popularity of r/wallstreetbets among retail investors, and the direct access by retail investors to broadly available trading platforms, the market price and trading volume of our Class A common stock could experience extreme volatility for reasons unrelated to our underlying business or macroeconomic or industry fundamentals, which could cause you to lose all or part of your investment if you are unable to sell your shares at or above the initial offering,” reads the filing.

At this point, it’s unclear whether r/wallstreetbets users will even want those shares, since some of the subreddit’s users have already expressed their intentions to bet against Reddit stock. Perhaps some armchair investors are turned off by the middling returns achieved by recent tech IPOs.

No matter how Reddit’s IPO fares, at least one tech industry big shot is likely to come away with a significant payday. The S-1 filing revealed that OpenAI CEO Sam Altman is Reddit’s third-biggest shareholder, controlling 8.7% of its stock.