Reddit IPO: What Investors Should Know
Investors are eagerly waiting for the anticipated Reddit IPO. Co-founder Steve Huffman recently announced that the company has plans to go public at some point.
So, what’s the latest news on the anticipated Reddit IPO? Here’s what we know…
Reddit IPO: About The Business
The Company History
University of Virginia roommates Steve Huffman and Alexis Ohanion founded Reddit in 2005. The two wanted to build an app that could allow users to order sandwiches online. They exchanged ideas with Y Combinator in hopes that the seed funding incubator would back the idea.
The idea was shut down by Y Combinator partner Dr. Paul Graham. In 2005, apps weren’t mainstream – the idea was viewed as unrealistic. Nevertheless, Paul took an interest in the roommates and proposed a bulletin board-style platform for news-related information. The idea inspired Reddit (“Read It”) and the idea soon became a reality.
Reddit was bought by Condé Nast in October 2006 for $10 million. As part of a contract, Huffman and Ohanion worked with Reddit until 2009. In late 2011, Reddit became an independent subsidiary of Advance Publications, the parent company of Condé Nast. After going their separate ways, Huffman and Ohanion returned to Reddit 2015. Huffman was appointed CEO, while Ohanion was reappointed Executive Chairman.
“The Front Page of The Internet”
Today, Reddit is made up of a massive collection of forums. Users, called Redditors, can share opinions, news and debates with one another. Posts are open to the entire Reddit community to vote upon, either by up- or downvotes. There are over 130,000 different sub forums and communities referred to as subreddits. They cover almost any topic you can imagine… from stocks to public freakouts to specific video games. If you can think of it, there’s probably a subreddit for it.
In the last few months, subreddit communities like r/WallStreetBets have risen in both popularity and controversy. Reddit has made headlines for its involvement in the rise in price (and subsequent steep fall) of various stocks like GameStop, Bed Bath & Beyond and meme stocks.
The platform claims to be the “front page of the internet.” And it’s not far off – if you’ve searched the internet for answers on any subject, there’s a chance you’ve found your answer on Reddit. Users have a history of being able to detect trends and news before anyone else. With millions of users, a popular post can become the next internet – or stock market – phenomenon.
Company Growth Hints at Eventual Reddit IPO
The site is currently the 19th most visited on the internet. And shows no signs of slowing down. In October 2020, Reddit said to have 52 million daily users – a 44% year-over-year growth. Jen Wong, chief operating officer of Reddit, stated…
We’re sharing [daily active users] for the first time as a more accurate reflection of our user growth and to be more in-line with industry reporting… We’re focused on daily usership and increasing this number as we continue to grow our community and scale our advertising business.
In a December 2020 interview with Wall Street Journal, Wong noted coinciding growth with users and its advertising. The company’s ad revenue stood at more than $100 million for the year 2019. But just last week, Reddit announced that it earned $100 million in ad revenue for Q2 alone. The earnings represent a 192% increase from the same period last year, and a record high for the company.
Reddit is securing funds to continue growing. In addition to Reddit’s ad revenue milestone, the company announced plans for a Series F funding round that intends to raise up to $700 million.
Reddit Stands at $10 Billion Valuation after Funding Round
The company has undergone several funding rounds that are making investors believe a Reddit IPO is in the near future. Earlier this year, the company raised $250 million. The funds brought the company to around $800 million in total funding. On August 12, Reddit announced plans for an even more massive windfall, with a Series F led by Fidelity.
The company confirmed with TechCrunch that it raised $410 million from Fidelity thus far. Reddit announced it plans to reel in up to $700 million in its Series F funding. The funding brings Reddit to a $10 billion valuation – up from its $6 billion valuation in February.
Reddit IPO Filing Details
The Reddit IPO date hasn’t been announced. The company has yet to file paperwork with the Securities and Exchange Commission (SEC) to begin the IPO process. But the company recently hired its first-ever CFO, and it has investors speculating.
Co-founder Steve Huffman noted that Reddit will go public at some point, after all…
In a NY Times interview, Huffman mentioned that the latest funding round wasn’t planned, but “Fidelity made us an offer that we couldn’t refuse.” Huffman went on to say that Reddit is “still planning on going public, but we don’t have a firm timeline there yet … All good companies should go public when they can.”
While the official date for the Reddit IPO hasn’t been announced, hints for future plans toward going public from Steve Huffman should have investors preparing. An announcement could come any day now, so check back here for the latest updates!
As always, make sure to research before you invest. IPOs can be volatile for the first few months. And share prices can change quickly. But if IPO investing interests you, check out our top recent IPOs and our IPO calendar. We update it daily to give you the latest news on upcoming and filed IPOs.
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You’ll hear directly from bestselling author and investment expert Alexander Green. He’s also worked as an investment advisor, research analyst and portfolio manager on Wall Street for 16 years.
About Aimee Bohn
Aimee Bohn graduated from the College of Business and Economics at Towson University. Her background in marketing research helps her uncover valuable trends. Researching IPOs and other trends has been her primary focus over the past year. When Aimee isn’t writing for Investment U, you can usually find her doing graphic design or traveling with friends.