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Reddit filed for an IPO under the ticker symbol RDDT.
The company is late to the party after several IPOs of early social media platforms like Facebook (2012), Twitter (2013), Snap (2017), and Pinterest (2019).
Reddit is expected to go public in the coming weeks, with bankers targeting a valuation of at least $5 billion (a 50% haircut from its 2021 funding round).
We finally get to see the numbers behind one of the most popular websites in the world for the first time.
When a company plans to go public, it issues a form S-1, a very long document that breaks down all the inner workings of the business, from secret sauces to skeletons in the closet. It’s like a tell-all autobiography before it hits the big stage of public trading.
I spent hours reviewing the 200+ pages of Reddit’s S-1 so you don’t have to.
This IPO involves some unusual surprises, with a portion of its shares reserved at the IPO price for the users and moderators who have “meaningfully contributed to Reddit community programs.”
You don’t want to miss the section about management’s compensation.
Let’s review what we learned.
Today at a glance:
Overview.
Business Model.
Financial highlights.
Risks & Challenges.
Management.
Use of Proceeds.
Future Outlook.
Personal Take.
1. Overview
Reddit was launched in 2005 by Steve Huffman and Alexis Ohanian (husband of tennis legend Serena Williams). Y Combinator initially funded the startup. It also raised money from an impressive list of investors like Andreessen Horowitz, Chinese behemoth Tencent, and rapper Snoop Dogg.
Paul Graham called it the “front page of the Internet.”
Anonymous users would discuss any topic, from theories on the latest TV shows to makeup tips. The site has many unique features:
🌐 Subreddits: On Reddit, you join communities and follow your interests instead of following people. Self-governing volunteers moderate these communities. Each community has a unique r/ name.
⬆️ Voting: Users can upvote or downvote posts and comments, making the most popular or helpful content crawl to the top.
⭐️ Karma: Reddit gives users virtual internet points called Karma whenever they get upvotes, unlocking the right to post in some communities.
The site took off, and Huffman and Ohanian sold Reddit to media company Condé Nast (Wired) for a reported $10 to $20 million in 2006. Condé Nast spun it off in 2011. Steve Huffman remained CEO until 2009 before taking a break and starting a travel website called Hipmunk.
Meanwhile, Reddit grew into one of America’s most popular websites.
In 2015, Huffman returned as CEO following the resignation of Ellen Pao after significant backlash during her tenure.
Here are some key numbers to illustrate Reddit’s reach today:
100,000+ active communities.
73 million daily active unique users.
267 million weekly active unique users.
Reddit popularized the Ask Me Anything (AMA) format: Reddit's AMAs have attracted various public figures, from Barack Obama to Bill Gates, significantly contributing to the format's popularity.
In 2021, r/WallStreetBets, a subreddit, catalyzed a market upheaval by driving a short squeeze on stocks like GameStop, inflicting heavy losses on hedge funds, and highlighting the influence of online communities in shaping financial markets.
Who are the Redditors? The chart below shows the overlap between Reddit and other major social platforms, according to Comscore. While the data might seem surprising at first, it can be easily explained if we dig deeper.