Reddit reveals its finances, a major step toward public disclosure

Reddit, the community-focused message board site, took a major step toward going public on Thursday, paving the way for the first major social media company to debut on the stock market in years and providing a test for private individuals. companies after a drought. in IPOs.

In a offer a prospectusReddit announced its financial performance in preparation for selling shares to investors. The San Francisco-based company reported that its revenue rose more than 20 percent as losses narrowed last year, and it had 73 million daily users.

The prospectus sets in motion a process to the stock market, where the 19-year-old company will meet with potential investors to drum up their interest in buying its shares. Reddit could go public on the New York Stock Exchange within weeks. The company was valued at more than $10 billion in a private financing in 2021.

Reddit is the last of an earlier generation of social media companies to target the stock market, following Facebook’s high-profile offering in 2012, Twitter’s in 2013 and Snap’s in 2017. In the years since, the social media industry has changed and faced criticism for misinformation, hate speech and other impacts. Some companies have changed direction; Facebook was renamed Meta and Twitter was bought by Elon Musk, who took the company private in 2022 and renamed it X.

Reddit’s move after a lull in IPOs is also highly anticipated. Just 108 companies went public in the United States last year, about a quarter of the number that debuted in 2021, according to data compiled by Renaissance Capital. Some of the biggest tech offerings last year were Arm, a chip designer, and Instacart, a grocery delivery company.

“We are going public to further our mission and become a stronger company,” said Steve Huffman, CEO of Reddit, in a letter from the founder included in the prospectus. “We hope that making it public will also bring meaningful benefits to our community.”

In its prospectus, Reddit said 2023 revenues were $804 million, up about 21 percent from $666 million a year earlier. The company lost $90 million in 2023, compared with a loss of $158 million the year before, according to the prospectus.

Reddit’s path to the public markets has been long and bumpy. Founded in 2005 in a University of Virginia dormitory by Mr. Huffman and Alexis Ohanian, the site started as a place for anonymous users to get together and discuss everything from popular TV shows to guitars, makeup and high-pressure cleaners.

Reddit was unique in that it focused largely on tight-knit communities, mostly anonymous, each moderated by volunteers who self-governed their forums, or “subreddits,” based on self-made rules.

The company has raised hundreds of millions of dollars in funding over the years, including $250 million and more than $410 million in two funding rounds in 2021. Investors include Fidelity Investments, Andreessen Horowitz, Sequoia Capital and Tencent Holdings.

Like other early social networking efforts, Reddit initially eschewed advertising and monetization. Instead, it focused on forms of revenue that grew from community ideas, such as a user-generated e-commerce system and prizes that users could buy for each other. Those ideas are still in play.

Reddit eventually embraced advertising based on its topic-focused communities. For example, brands like Laneige targeted ads on a forum called Makeup Addiction, one of the most active subreddits where users discuss cosmetics and how to apply them.

The site has also built an emerging data licensing business on its vast corpus of conversation data, which has become increasingly important amid the frenzy over artificial intelligence. AI models are trained on blobs of such data so they can become more powerful. On Thursday, Reddit announced a licensing agreement with Google, which has used Reddit data to train and build its AI systems.

The site has had its share of struggles. It faced controversy after controversy over its refusal to moderate communities in its early years, including its role in spreading misinformation during the 2013 Boston Marathon bombings, and hosting racist and misogynistic content in some of its smaller subreddits . Last year, Reddit faced a user uprising after it changed some rules and banned third-party developers from using the site’s content without paying for it.