Reddit IPO filing discloses $90.8-million losses, 21-per-cent revenue growth in 2023

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Reddit disclosed on Thursday that its net loss narrowed to US$90.8-million and revenue growth was roughly 21 per cent in 2023, as the social media company made its IPO filing public in the run-up to its highly anticipated planned U.S. stock market debut in March.

The initial public offering (IPO) filing comes almost two decades after Reddit’s launch and will be a major test for the platform that still lags the commercial success of social media contemporaries such as Facebook and Twitter, now known as X.

Reddit said it had an average of 73.1 million daily active users and 267.5 million weekly active users in the three months ended Dec. 31, 2023. The company said more than 100,000 active communities used its platform, which had one billion cumulative posts.

In the IPO filing, Reddit reported a narrower net loss of US$90.8-million for the year ended Dec. 31 and logged revenue growth of US$804-million, up from US$666.7-million a year earlier.

Reuters reported on Wednesday, citing sources, that San Francisco-based Reddit has struck a deal with Alphabet Inc.’s Google Inc. to make its content available to train the search engine giant’s artificial intelligence models. The contract is worth about US$60-million each year, according to one of the sources.

Reddit was valued at US$10-billion in a funding round in 2021 and it is unclear what valuation the company will aim for during its share sale in the coming weeks. It is expected to seek a sale of nearly 10 per cent of its shares in the IPO, Reuters reported earlier.

The IPO filing showed chief executive Steven Huffman holds Class B common stock that is issuable upon achieving a vesting condition – that Reddit attains US$5-billion market capitalization valuation after the offering.

The social media firm is reportedly expected to hit the valuation target from the get-go.

While Reddit was launched around the same time as other social media pioneers such as Meta Platforms Inc., which operates Facebook and Twitter, its user base is far smaller than its contemporaries. Reddit’s growth numbers also pale in comparison to larger social media peers as the company has struggled to successfully monetize its platform over the years.

There have also been questions about the company’s approach to content moderation, which has been a sticking point with advertisers. It already faces stiff competition for advertising dollars from TikTok and Facebook.

Reddit has, however, built a loyal base among its users. Its message boards have powered several “meme-stock” rallies in the last few years, most notably in 2021, when retail traders teamed up to spark a meteoric surge in shares of highly shorted companies such as GameStop Corp. and AMC Entertainment Holdings Inc.

Founded in 2005 by web developer Steve Huffman and entrepreneur Alexis Ohanian, husband of tennis champion Serena Williams, Reddit has been backed by several marquee investors, from venture capital giant Andreessen Horowitz to China’s tech behemoth, Tencent Holdings. Rapper Snoop Dogg is also an investor in the company.

Since being spun off from magazine conglomerate Condé Nast in 2011, Reddit became best known for its niche discussion groups and its users voting “up” or “down” for content other members posted.

It has made efforts in recent years to freshen its appeal among younger users through its acquisition of TikTok competitor Dubsmash in 2020.

The company, which generates its revenue primarily through advertising and also offers premium access for a monthly fee, has yet to turn a profit, Mr. Huffman said in a Reddit post last June.

It had confidentially filed for the U.S. IPO in late 2021, but tough economic conditions and the poor performance of listed technology stocks compelled it to delay the offering.

Morgan Stanley and Goldman Sachs have been tapped as the lead underwriters for Reddit’s IPO, which includes more than a dozen other banks.