Reddit Files to Go Public at Last
upstart writes:
Growing but unprofitable, Reddit could kick off 2024's IPO cycle:
Social media giant Reddit filed to go public today [22 Feb 2024]. Its long-awaited S-1 filingwill see it approach the public markets potentially at the head of a long column of richly valued technology startups and private companies that need to find an exit this year.
[...] The company's got a long and tangled history. It wassold in its infancy, only to be later spun back out. Today Reddit approaches the public markets with more than $800 million worth of revenue in 2023, up from $666.7 million in 2022.
However, the company remains unprofitable on both a GAAP and adjusted basis, and continues to consume cash to fund its operations. Scale has not yet solved the profitability question for Reddit, which could limit its potential valuation when it does list its shares.
In 2022, Reddit generated a net loss of $158.6 million and had an adjusted EBITDA of negative $108.4 million. In 2023, those figures improved to a $90.8 million net loss and $69.3 million worth of negative adjusted EBITDA. The company's free cash flow improved from -$100.3 million to -$84.8 million over the same timeframe.
The company may be making progress toward stemming the red ink that is missed in its annual figures. In the final quarter of 2023, Reddit not only posted what was at least a local maximum in revenue terms - $249.8 million - but also a net profit of $18.5 million. While the GAAP profit is notable for the fourth quarter, the company's free cash flow was still negative in the period, ending the three-month period at -$22 million.
Reddit raised more than $1 billion while private, according to Crunchbase data. That figure includes a massive $410 million Series F raised in 2021 and a smaller $368 million Series E raised earlier the same year. The Series E pushed Reddit's valuation to $6.4 billion, while its Series F took it to a roughly $10 billion valuation.
Both of those bubble-era valuations will be tested in Reddit's now quickly forthcoming IPO. But the company's debut will be more than a test for certain private-market startup valuations. Reddit is reportedly trying something novel in its own flotation.
In what is broadly viewed as an unorthodox move, Reddit reportedly plans to reserve an undetermined number of shares for 75,000 of its users, according to the Wall Street Journal, which cited people familiar with the matter. Those users will be given the chance to scoop up shares of Reddit at its IPO price before the stock even begins trading - something typically reserved only for large investors.
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