Reddit is about to go public and plans to allocate part of its shares to platform users

Reddit is about to go public and plans to allocate shares to platform users. Users will have the opportunity to share in Reddit's success and become one of the company's shareholders. The news caused widespread concern and discussion on social media. Reddit's listing initiative is considered a major attempt at a community economic model, and is also seen as recognition and feedback for user participation. This move is expected to change the relationship between traditional enterprises and users, bringing more sharing and cooperation opportunities.

By Nicholas Megow Hannah Murphy, FT Chinese

Reddit reveals sales of more than $800 million and dwindling After a long delay, the company finally released the prospectus for its initial public offering (IPO). The prospectus outlines plans to allocate a portion of shares to retail investors and social network users.

The first large technology group will be listed on the US IPO market in 2024, which will be a severe test of market strength. After two years of slump, the company plans to list on the New York Stock Exchange early next month under the ticker RDDT.

The company said the number of shares sold to retail investors and Reddit users will be "significant."

Steve Huffman, co-founder and CEO of Reddit, said in the prospectus that the company hopes that going public will bring substantial benefits to the community. He stressed that Reddit's users enjoy a deep sense of ownership in the communities they create, which often extends to the entire Reddit platform.

Reddit was valued at $10 billion in its most recent private financing in 2021, but some investors have since cut its valuation by about 50%.

The prospectus shows that San Francisco-based Reddit will have sales of $804 million in 2023, a year-on-year increase of 21%. The company, once known as a bastion of free speech, derives most of its revenue from advertising, forcing it to more closely police the dark side of the platform in recent years. In 2023, the company's net loss fell from $159 million to $91 million, but it never became profitable.

It is said that the platform has 267.5 million weekly active users, who are active on more than 100,000 subreddits, covering various forums based on personal topics and interests, the most famous of which is the WallStreetBets trading forum.

Reddit plans to allocate shares to long-term users, or "redditors," using a "directed stock plan" and sell shares to the broader retail investing community through apps like Robinhood and SoFi. Reddit said that this move will provide users with more opportunities to participate in corporate governance and investment, and will also drive more retail investors to join the stock trading market. The initiative aims to increase user loyalty to Reddit and create more investment opportunities for users. Reddit aims to boost community engagement and

with the move, and the company warned that having an unusually large number of retail traders participate in the listing could lead to increased stock price volatility and potentially replicate what happened in 2021 shortly after Robinhood went public. The kind of "Internet celebrity stock" price behavior in which the stock price suddenly rises sharply.

The prospectus states: “The initial high level of interest... may result in an unsustainable market price, in which case the market price of our Class A common stock may decline over time. And down."

In addition to advertising, Reddit is also looking to diversify its revenue, such as charging third parties for access to its data that was previously free. Separately, Reddit announced Thursday that it has reached a deal with Google that will bring "Reddit content to display in new ways across Google products" while allowing the search engine to use Reddit posts to train its artificial intelligence models. The agreement is worth about $60 million per year, Reuters reported on Wednesday.

Reddit is also looking to generate revenue by formalizing some of the marketplaces that have emerged on the site, such as subforums where users pay each other to request photos or sell sneakers.

According to the prospectus, entities related to artificial intelligence group OpenAI CEO Sam Altman (Sam Altman) beneficially owned more than 5% of the outstanding share capital before the initial public offering. Altman was a member of Reddit's board of directors at the time of the 2021 financing, the filing said.

Reddit first submitted a confidential version of its prospectus more than two years ago, but its plans to go public were disrupted as rising interest rates and falling valuations of technology stocks froze most new listings.

However, in recent months, as investors have become more confident that interest rates will peak and stock indexes have hit new highs, listing activity has also been picking up.

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