Matt Slocum/AP
Reddit, the San Francisco social media site that describes itself as “the front page of the Internet,” filed for an initial public offering (IPO) on Thursday, reflecting the tech company's goal to expand its presence and awareness.
The company is expected to list on the New York Stock Exchange under the ticker symbol “RDDT” in the coming weeks.
Founded in 2005 by Alexis Ohanian and his University of Virginia dormmate Steve Huffman, the site began as a gathering place for anonymous jokes and commentary about culture and politics. Its user base has grown over the years, with 76 million people visiting the site daily from more than 100,000 communities, according to filings with regulators.
For years, Reddit has been the world's most popular message board, with volunteer moderators determining the rules for each community.
Huffman, Reddit's CEO, said in a letter accompanying the regulatory filing that he hoped the disclosure would benefit the site's community along with investors. “Our users take a deep sense of ownership over the community they have created on Reddit,” Huffman wrote.
Advance Publications, which owns Condé Nast, is Reddit's largest shareholder, Reddit's filings show. The second largest shareholder is Chinese technology company Tencent. Sam Altman, CEO of ChatGPT maker OpenAI, is Reddit's third-largest shareholder, according to the filing.
Altman's stake is more than twice that of Reddit's CEO, Huffman.
Share reservations for top users
In an unusual move, the company plans to allow top users, including moderators, the opportunity to buy shares in an initial public offering, also known as an IPO. Typically, companies offer shares primarily to institutional investors during stock market debuts.
The company also said it is allocating stocks to individual investors through brokerage apps such as Robinhood. Which users are chosen is determined by their Reddit “karma,” a term the site uses to determine a user's reputation on the platform.
“We will assign each participant to a tier based on their contribution to Reddit,” the company said in a filing with regulators, but did not specify how many shares it would set aside for Reddit users.
Reddit, led by co-founder and CEO Steve Huffman, plans to launch a formal roadshow to investors next month, at which time it will announce the price at which it hopes to sell its shares.
In the crowded world of social media, Reddit has gained popularity by allowing communities to govern themselves, amassing large, dedicated followers in so-called subreddits, or individual message boards.
This laissez-faire approach has proven to be divisive. Supporters of free speech have cheered the lack of centralized rules and enforcement measures seen on rival platforms such as Facebook, Instagram and TikTok. But critics have accused Reddit of allowing harmful material, including harassment, racism and private celebrity photo leaks, to surface in online communities.
Although efforts are underway to curb the most harmful material on Reddit and set clear guardrails to block the most harmful content, most decisions about what can be posted on the site are still made by moderators.
Reddit has been at the center of the GameStop stock frenzy.
Reddit became the center of a stock market storm when a subreddit known as WallStreetBets organized small investors to help send shares of video game retailer GameStop soaring to massive highs. -They are called meme stocks.
In recent months, Reddit has taken a number of controversial steps widely seen as preparing for a public offering, which it first revealed was planned for late 2021.
Among the changes was Reddit's decision to charge some developers to access the site. The move sparked a boycott among thousands of Reddit communities, angry that the change would eliminate third-party apps heavily used for reading and posting on the site. Critics argued that the policy change was an attempt to move users away from third-party apps and toward Reddit's own app.
Another controversial announcement was made just before Reddit submitted its paperwork for public disclosure. The company has signed a licensing agreement with Google that collects data from thousands of communities on the site to help train Google's artificial intelligence models.
“Reddit represents one of the largest data sets of humans talking about interesting things,” Huffman told NPR in June. “We’re not in the business of giving it away for free.”
Reddit (along with fellow social media platforms Facebook, Instagram, Snap, YouTube, etc.) has been addressing the slowdown in digital advertising spending. As a result, companies are under pressure to find new ways to generate revenue, which has become especially urgent ahead of IPOs.
Analysts say investors will now pressure the company to show how it can become profitable, but so far it has not done so. In the final three months of last year, Reddit reported net income of $18 million and a net loss of $90 million, according to a filing Thursday.
Last June, Huffman told NPR that the company's ups and downs over the years have had consequences.
“We’re 18 years old,” Huffman said in 2023. “I think it’s time for us to grow up and act like an adult company.”