Will The Reddit IPO Finally Happen Later In 2023?
Reddit is a news aggregation platform and discussion site that’s popular with Gen Zers and millennials. It provides them with unlimited talking points through subreddits — online community posts within Reddit that discuss set topics, such as movies like “Breaking Bad” or the fictional paper and office supplies company Dunder Mifflin featured in “The Office.”
The growing popularity of Reddit and the loyalty of its core users prompted the company to begin the initial public offering (IPO) process in 2021. The company delayed the IPO, with a current plan for launching it later in 2023.
Reddit Submitted IPO Paperwork in 2021
The IPO market remains cold even as multiple potential listings stalled. Market volatility and broad selling of technology stocks dampened the prospects for new IPOs. Reddit is looking to launch an IPO in the second half of 2023. In the fall of 2021, Reddit filed regulatory paperwork with the Securities and Exchange Commission to start the pre-IPO process. The usual timeline from this submission to launching an IPO is six to nine months, so Reddit obviously delayed its IPO plans.
According to CB Insights’ list of unicorn companies — private firms with a $1 billion or higher valuation — Reddit holds a $10 billion valuation, which is down from its 2021 valuation of $15 billion. Fidelity Investments ranked the company at a $6.6 billion valuation in February, reflecting the broader fall in the stock market, technology firm values and economic uncertainty.
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How The Meme Stock Made Reddit A Household Name
The discussion of various meme stocks — shares of a company that gain a cultlike following — in the winter of 2021 brought considerable attention to Reddit and its influence in financial markets. These discussions on the subreddit r/wallstreetbetsp focused on investing through very aggressive strategies.
One of the discussion groups centered on GameStop Corp., a video game and electronics retailer. Around 2016, the company saw a steep continual decline in its business. This was because of the availability of downloadable video games, which meant falling demand for physical game DVDs and dissatisfaction with the company’s practices. In early 2021, many redditors bought GameStop in a frenzy that caused a massive short squeeze that impacted hedge funds and other short sellers. The stock saw a steep rise and precipitous fall and brought attention to the power of subreddits to move stock prices.
Other meme stocks featured on Reddit included AMC Entertainment Holdings Inc. and BlackBerry, which brought further attention to Reddit’s influence in financial markets and broadened its name recognition among the public.
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How Does Reddit Make Money?
Reddit’s primary revenue source is advertising presented to the site’s approximately 430 million monthly users. The company also offers a premium subscription for $5.99 per month that offers ad-free browsing, exclusive rewards and avatars and other customizable features not available for nonmembers.
The IPO market remains cool. A report from PricewaterhouseCoopers titled “Global IPO Watch” saw a steep decline in IPO activity in 2022, with global IPO proceeds 70% lower than 2021. Beyond Reddit’s plans, other big names considering an IPO in 2023 include:
Stripe Inc., a financial services and software as a service (SaaS) firm headquartered in the U.S. and Ireland
Instacart, an online grocery delivery provider that delayed its IPO plans in the fall of 2022
Chime Financial Inc., a popular fee-free mobile banking services company
To move forward with a successful IPO in this lukewarm market, Reddit will need to reassure investors it can make money through advertising, even in an economic downturn. It might need to present additional ads to users or make them more prominent or intrusive, which could turn away some users. With the financial market turbulence, Reddit’s management will consider whether the timing is right for a 2023 IPO or whether it will need to push into 2024 or beyond.
For Investors: Thanks to recent changes in federal law, anyone can invest in pre-ipo opportunities and startups like Reddit. For example, MaxTracker is a startup building an innovative GPS tracker with AI features and a battery life of up to a year.
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This article Will The Reddit IPO Finally Happen Later In 2023? originally appeared on Benzinga.com
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