Reuters reports Reddit IPO could happen in March

Reddit draws up plans to go public in March this year, as per exclusive Reuters report

Social media platform Reddit is gearing up for its long-anticipated initial public offering (IPO) in March, a move it has contemplated for over three years, according to an exclusive report by Reuters correspondents Echo Wang and Anirban Sen citing insiders familiar with the matter.

If successful, it will mark the first IPO of a major social media company since image sharing platform Pinterest debuted in 2019. Reddit faces intense competition for advertising revenue from platforms such as TikTok and Facebook, setting the stage for a significant test of investor confidence in the company.

The IPO, scheduled to take place by the end of March, will be a pivotal moment for Reddit and its user base, known for fueling various "meme" stock rallies, including those of GameStop and AMC Entertainment Holdings. Having filed for its IPO confidentially in December 2021, Reddit plans to make its public filing in late February, start its roadshow in early March, and complete the listing by the end March, two of the sources told Reuters.

Reddit yet to turn a profit, company waited until better financials to go public

The San Francisco-based company, valued at approximately $10 billion in a 2021 funding round, aims to sell around 10% of its shares in the IPO, with the final valuation to be determined closer to the listing date. Although the IPO plans could face potential delays, sources close to the matter caution that Reddit's IPO timeline may shift, as has happened previously.

Founded in 2005, Reddit, led by web developer Steve Huffman and entrepreneur Alexis Ohanian, gained prominence for its specialized discussion groups and user-driven content curation. Despite generating revenue primarily through advertising and offering premium access for a monthly fee of $5.99, the company has yet to turn a profit, as confirmed by Huffman in a Reddit post last June.

Reddit had refrained from pursuing the IPO until it reached closer to profitability, influenced in part by market volatility that disrupted IPO plans over the past two years. The company has attributed its financial losses to strategic investments in the platform and lower user engagement with advertising compared to other social media platforms.

Reuters wrote that a spokesperson for Reddit declined to comment on the matter.

The company had previously forecasted advertising revenue of slightly over $800 million in 2023, a growth of more than 20% from the previous year, according to a report by The Information. Last year, Reddit also announced plans to charge companies for access to its application programming interface (API), a move that sparked discontent among users who rely on third-party apps to access the platform.

Success of Reddit IPO may fall in line with broader tech resurgence

Amid a broader resurgence in technology stocks, social media giants like Meta Platforms (Facebook) and Snap have experienced significant gains over the past year, driven primarily by a rally in the tech sector as interest rates peaked. Meta Platforms' shares have more than tripled in value over the past 12 months, while Snap's shares rose by 60% during the same period.

Last year saw high-profile IPOs from companies like UK-based chip designer Arm, consumer health company Kenvue, and storied German shoemaker Birkenstock. In total, 107 offerings raised $19.4 billion, falling below the 10-year average but marking a 49% rebound in deal count from 2022. Nearly twice as many IPOs raised $100 million or more.

Despite investor optimism and media buzz, IPOs in 2023 lost an average of 19% from their debuts. Less than one-third of IPOs were trading above their offering price as of late December, according to Renaissance.

According to Markets.com’s recent overview of the IPO market in 2024, more companies may go public this year, fueled by an improved outlook and expectations of three interest rate cuts from the U.S. Federal Reserve, which are expected to invigorate growth-oriented companies. Multiple banks, such as Goldman Sachs, Renaissance Capital and UBS all shared optimistic outlooks for IPOs in 2024.

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