Reddit wants to raise $748M with IPO, sets value at $6.4B... and it has yet to turn a profit
- Reference: 1710169209
- News link: https://www.theregister.co.uk/2024/03/11/reddit_wants_to_raise_748m/
- Source link:
The "front page of the internet" posted an [1]amendment to a previous Securities and Exchange Commission filing detailing more of its IPO plans, including pricing information and what the company thinks it is worth.
According to the amended S-1 form, Reddit and its investors will be placing approximately 22 million shares for sale when it finally decides to go public "as soon as practicable" at a price between $31 and $34 a piece. At the high end that could raise around $748 million.
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As per the filing, Reddit states:
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"Reddit, Inc. is offering 15,276,527 shares of its Class A common stock and the selling stockholders identified in this prospectus are offering an aggregate of 6,723,473 shares of Class A common stock. This is our initial public offering and no public market currently exists for shares of our Class A common stock. We will not receive any proceeds from the sale of shares of common stock by any of the selling stockholders."
When factoring in restricted stock units, vesting options and additional shares being held by the deal's underwriters, Reddit's filing indicates a valuation of around $6.4 billion. That is a nod to the value of Reddit's massive repository of user posts and comments - 850 million monthly users - and its use as an AI training tool for companies like [5]Google , which recently paid $60m for the rights to slurp up user content to train Gemini.
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Reddit has already used that agreement to create an [7]AI-powered harassment filter for moderators.
Unless someone else jumps into the ring with very rapid IPO plans, Reddit will be the first tech stock to launch in 2024, and the first social media company to go public since Pinterest in 2019.
Whether Reddit's stock price will stay above its initial offer is anyone's guess - the company hasn't [8]ever turned a profit since coming online in 2005.
What the repost bots have been waiting for
Along with spelling out terms of its valuation and the introductory price of future shares, Reddit also posted additional details about its direct share program, through which it plans to hold 8 percent of its IPO shares in reserve for eligible Reddit users, moderators, board members and friends and family.
Eligibility for the direct share program isn't very steep - Reddit users and moderators only have to have an account created on or before January 1 of this year to qualify for early access to the 1,760,000 shares being set aside for the program.
[9]Thar be safe harbor: Reddit defeats third attempt to unmask digital pirates
[10]Thousands of subreddits go dark in mega-protest over Reddit's app-killing API prices
[11]Raspberry Pi on IPO plans: 'We want to be ready when the markets are ready'
[12]Reddit confirms BlackCat gang pinched some data
Getting a decent spot in the queue, on the other hand, won't be as easy.
Reddit is planning six tiers of early access based on each "participant's contributions to Reddit," the company said in its updated SEC filing. Those tiers are based on a user's "karma" score, ostensibly an aggregate total of up/down votes on posts and comments.
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The first tier of users will be those "who have meaningfully contributed to Reddit community programs," though what that means isn't explained more clearly. After that come tier 2 users, who must hold at least 200,000 karma points or have taken at least 5,000 moderator actions. Tier three includes users and moderators who hold at least 100,000 karma points and have taken 2,500 moderator actions. Tiers 4 and 5 are each half of the previous tier's total, and tier 6 includes everyone else, with a waitlist available if the total number of shares purchased exceeds the original 1.76 million.
Even better for the terminally online and all those repost bots that have managed to fly under the radar? The Reddit shares aren't subject to the 180 lockup period, so those highly valued users are free to ditch their shares if prices start to fall. ®
Get our [14]Tech Resources
[1] https://www.sec.gov/Archives/edgar/data/1713445/000162828024010137/reddit-sx1a1.htm#i1b9a579e78a34dfa99f7f26daeec195b_112
[2] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/networks&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2Ze84q7KKzWZPVXzUFf9vVwAAAEs&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/networks&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Ze84q7KKzWZPVXzUFf9vVwAAAEs&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/networks&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Ze84q7KKzWZPVXzUFf9vVwAAAEs&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[5] https://www.theregister.com/2024/02/22/reddit_google_license_ipo_altman/
[6] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/networks&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Ze84q7KKzWZPVXzUFf9vVwAAAEs&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[7] https://www.theregister.com/2024/03/07/reddit_introduces_aipowered_harassment_filter/
[8] https://www.cnn.com/2024/02/23/tech/reddit-ipo-filing-business-plan/index.html
[9] https://www.theregister.com/2024/02/13/reddit_pirates_win/
[10] https://www.theregister.com/2023/06/12/reddit_api_outage/
[11] https://www.theregister.com/2024/01/30/raspberry_pi_ipo/
[12] https://www.theregister.com/2023/06/20/reddit_confirms_blackcat_extortion_attempt/
[13] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/networks&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Ze84q7KKzWZPVXzUFf9vVwAAAEs&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[14] https://whitepapers.theregister.com/
"Reddit wants to raise $748M with IPO, sets value at $6.4B... and it has yet to turn a profit"
That sounds like pure greed and unjustified greed at that since Reddit has not made a profit so far, only large losses.
Greed by whom? The price of any business asset is justified by the returns the new buyers hope to make, not by the previous performance. In the case of many tech companies, those returns are likely to be an assumption that they will be able to sell the stock for a higher price than they paid for it. If this is the case and there's no dividends, then the share price hopes are based on the "greater fool" strategy, and the ultimate fool is whoever is left holding the asset when reality returns. In the American tech sector, reality is a rare but brutal visitor.
Any of the large US tech companies that aren't paying reasonable and regular dividends are similar, but it can work out for the lucky. If you'd bought Facebook when it listed in May 2012, you'd have paid $38 a share. If you'd sold in August of that year you'd have lost half your investment. If you'd held to Sep 2021, and then sold you'd have got back ten times what you paid. On the other hand, if you'd bought in Sep 2021 and sold in Nov 2022 you'd have lost three quarters of your investment.
Modern Business Plan
Many years ago, a friend tried to recruit me to a startup he was trying to get off the ground. He asked me to sign an NDA (Non-Disclosure Agreement), which is a sure fire indicator it is a 5h17 idea. His basic business plan was:
* write this cool software
* give it away
* to students
* for free
* get a whole lot of users
* sell out to VC's (Venture Capitalists)
* and let them figure out how to make a profit
I politely declined as I wouldn't feel comfortable taking his money. I also didn't have the heart to tell him I thought it was a 5h17 idea.
The kicker was that another company did the exact same idea, several other friends went to work there, and the company was then bought in an acqui-hire by one of the major players.
Comparison
At $6.4 billion, Reddit would be worth roughly the same amount as Twitter / X. That sounds about right.
Re: Comparison
> At $6.4 billion, Reddit would be worth roughly the same amount as Twitter / X. That sounds about right.
That would be without the lunatic moderators ..
Is there anyone in El Reg land
...that thinks Reddit is worth more than 50p and a bag of marbles?
"it has yet to turn a profit"
So, a dinosaur from the dot-com bubble then ?
No problem. Go public. I'll see how you fail, then I'll choose if and when I invest.
I'm sure all your VC partners have long since prepared their exit.
Start turning a profit and I'll pay more attention.