Reddit has taken a significant step towards going public, filing an S-1 statement with the Securities and Exchange Commission (SEC) as it eyes an initial public offering (IPO) on the New York Stock Exchange under the symbol RDDT.

Financial Snapshot: Revenue Soars, but Profits Elusive

According to the filed document, Reddit reported a robust $804 million in revenue for the past year, primarily sourced from advertising, constituting a staggering 98%. However, the platform remains in the red, disclosing a net loss of $90.8 million in 2023. Despite the financial challenges, Reddit boasts an impressive user base, with 267.5 million weekly active users, over 100,000 active communities, and a staggering 1 billion publications.

Exclusive Opportunity for Top Users: Unveiling the IPO Share Offering

In a move rarely seen in the corporate landscape, Reddit is extending an extraordinary opportunity to a select group of its top users, including moderators and high karma scorers, to participate in the IPO by purchasing shares. Typically reserved for institutional investors, this privilege allows these active members to secure shares at a potentially discounted rate before they hit the public market.

Reddit is adopting a tiered system for share distribution. The initial tier targets “certain users and moderators identified by us who have made significant contributions to Reddit’s community programs.” Subsequent tiers include those with a karma score exceeding 2,000 and individuals who have completed at least 5,000 moderator actions. The company has set aside 1.3 million shares of its Class A stock explicitly “to fund community-related programs that allow Redditors to bring their ideas to life.”

Monetization Strategy Unveiled: Data Licensing and AI Training

Beyond traditional revenue streams, Reddit outlines its multifaceted monetization strategy, citing data licensing and training artificial intelligence (AI) models as key components. The company has previously disclosed a lucrative $60 million deal with Google for training AI systems.

Altman’s Influence: OpenAI CEO’s Stakes in Reddit

Adding an intriguing layer to the narrative is the involvement of Sam Altman, the CEO of rival company OpenAI. Altman has invested a substantial $60 million in Reddit stock, securing a notable 9.2% of Reddit’s voting power. This investment saga traces back to 2014 when Altman, then president of gas pedal Y Combinator, first entered the Reddit investment scene. His financial involvement continued through 2021, solidifying his equity stake.

As Reddit charts its course towards the public market, the platform’s unconventional decision to involve its active users in the IPO process represents a paradigm shift, blurring the lines between community engagement and corporate governance. The story unfolds with anticipation as Reddit prepares to embrace a new era, one where its dedicated users may find themselves not just participating in discussions but also in the boardroom.

Source: https://www.cnbc.com/2024/02/22/openai-ceo-sam-altman-stands-to-net-millions-as-reddit-goes-public.html