The social media giant, Reddit, has been planning to go public for a while now. Its on-again, off-again plans for an initial public offering (IPO) might be on yet again. Bloomberg report suggests that the social media platform has once again begun holding talks with potential investors, with growing optimism about a potential opportunity for going public.
The San Francisco-based company, co-founded by Steve Huffman, Aaron Swartz, and Alexis Ohanian in 2005, is considering launching its IPO as early as the first quarter of 2024, sources told Bloomberg. In December of 2021, Reddit confidentially submitted a draft registration statement with the Securities and Exchange Commission (SEC) to go public. But those plans never materialized.
That move took place just months after Reddit had raked in a hefty $410 million financing led by Fidelity, valuing it at $10 billion. It had plans to close out the round, a Series F, at $700 million at the time. Then, in January of 2022, Reddit had even gone as far as to tap Morgan Stanley and Goldman Sachs to work on the listing. At the time, it was considering a valuation of as much as $15 billion.
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Reddit has been one of the leading IPO candidates for two years now but has remained on the sidelines as the market has not been conducive to big public debuts. Back in 2017, the company aimed to go public by 2020, then wound up filing privately to do that in late 2021, and then just decided to wait 2022 out. Then it set its sights on the latter half of 2023, and now we’re looking at 2024.
Last year was the worst in a decade for IPOs, and 2023 is likely to be just a tiny bit better. Much heralded IPOs from Instacart and Klaviyo, which many thought would signal the resurrection of the public offering market earlier this year, started strong, but both companies are now trading 10-15% below their first trade price. That halted plans for many would-be public companies to make their own debut.
“[Instacart and Klaviyo’s] poor post-IPO performance has dashed the hope of an immediate rebound in the IPO market for VC-backed companies,” said Kyle Stanford, lead venture capital analyst at PitchBook, earlier this month.
Hints from the Federal Reserve about interest rate hikes and cuts which could be a possibility for 2024, has started investors buzzing again. And Shein’s pending debut has only increased excitement. A lot of the decisions could depend on the success of a pending IPO from Shein, the fast-fashion company. It recently made its filing confidentially, with its last valuation standing at $66 billion. The company could debut on the public markets in early 2024.
Reddit filed for an IPO in December 2021 and was expected to go public in March with a valuation of up to $15 billion—but then the market chop began. Fidelity cut the estimated value of its shares in the company by one-third in May and the great wait was extended. Fidelity backed off the dire notes the following month, increasing the estimated value of its shares by 6.5%.
Since then, Reddit certainly seemed to be making moves to become more attractive to investors. In June, Reddit announced it would begin enforcing data rate limits on the free access tier of its application programming interface (API), a tool that powered popular third-party services that gave users an alternate way to browse Reddit’s forums.
That sparked a revolt among moderators and some users, but it was short-lived. All of the 8,4000 subreddit forums that went dark to protest the move, which resulted in charges for those third parties, have been back up and running for a long period. And importantly for the company, many users have moved over to the official Reddit app, which allows the company to profit from them by serving ads among forum feeds.
Reddit CEO Steve Huffman, who many thought would be forced to step down at the start of the protests, is now more powerful than ever. Last month, the Washington Post reported that Reddit was considering blocking search crawlers from Google and Bing, as the companies bickered over the use of Reddit data to train generative AI—and what compensation Reddit should receive.
While the determination of the company seems strong, their plans could change and there’s no guarantee Reddit will move ahead with listings. Several other firms have been considering sizable IPOs as soon as 2023, but with only a few weeks of trading left in the year, that window is rapidly closing.
