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social media giant Reddit filed to go public today. Its Long-awaited S-1 filing This will potentially see it reach the top of the public markets Tall Column of Highly Valued Technology Startups And private companies that need to exit this year.
The timing of Reddit’s IPO is no surprise,
The company has a long and complicated history. it was sold in its infancywill happen only later turned back out, Today Reddit is hitting the public markets with revenues of more than $800 million in 2023, up from $666.7 million in 2022.
However, the company remains unprofitable on both a GAAP and adjusted basis, and continues to burn through cash to fund its operations. Scales has not yet resolved the profitability question for Reddit, which could limit its potential valuation when it lists its shares.
Reddit generated a net loss of $158.6 million in 2022, and adjusted EBITDA of negative $108.4 million. These figures improve to a net loss of $90.8 million and negative adjusted EBITDA worth $69.3 million in 2023. The company’s free cash flow increased from -$100.3 million to -$84.8 million over the same time frame.
The company may be making progress in stemming the red ink left in its annual figures. In the last quarter of 2023, Reddit not only posted at least a local maximum in terms of revenue – $249.8 million – but also made a net profit of $18.5 million. While the GAAP profit for the fourth quarter is notable, the company’s free cash flow was still negative, ending the three-month period at -$22.0 million.
Reddit raised over $1 billion while remaining private, According to Crunchbase data, That figure includes one Huge $410 Million Series F Raised in 2021 and a A smaller $368 million Series E was raised earlier the same year, The Series E raised Reddit’s valuation to $6.4 billion, while its Series F took it to a valuation of nearly $10 billion.
Both of those bubble-era valuations will be tested in Reddit’s now-soon-coming IPO. But the company’s launch will be more than a testbed for some private-market startup valuations. Reddit is reportedly trying something new with its own streams.
IPO with a twist
In what is largely seen as an unconventional move, Reddit reportedly plans to reserve an undetermined number of shares for its 75,000 users. wall street journal, which cited people familiar with the matter. Those users will be given the chance to buy shares at Reddit’s IPO price before the stock begins trading — a move typically reserved only for large investors.
tailwinds
Reddit’s IPO filing comes at an auspicious time. reuters informed of Reddit has signed a deal with Google to allow the search giant to use its data. The publication increased the value of the deal to approximately $60 million per year. This represents about 7.5% of its 2023 revenue, which is a very nice tailwind for its 2024 results.
If Reddit is able to secure similar deals with other major AI model providers like OpenAI, it could see its revenue base expand from new sources this year in a way that reflects its first few quarters of results as a public company. Can affect.
Reddit is known as one of the Major source of data For LLM, that could give social media companies a way to monetize the current AI wave at much higher gross margins.
In its S-1 filing, the company said it is in the early stages of giving third parties the ability to “license access to search, analyze, and display historical and real-time data from our platform.” Investors love a growth story, and Reddit has a new revenue issue for its final roadshow.
investor pitch
The popular site is impressively growing its user base. The number of global daily active unique users (DAUQ) grew by 27% in the three-month period ending December 31, 2023. For a site that has been in existence for a decade, this is a significant achievement. Notably, according to the filing, Reddit had more than 500 million visitors in December 2023 alone and, on average, 73.1 million daily active Unixes globally in the three months ending December 31.
Looking to the future, Reddit believes it still has considerable opportunity to grow revenue through advertising. Not surprisingly, it claims to be in the “early stages” of using machine learning and predictive models to “better match supply and demand and deliver returns on investment” for its advertisers. Examples of this include using predictive models to help better predict the conversion rates of an ad.
Advertising revenues have recovered somewhat in the technology world, with companies like Meta and Amazon reporting earnings with massive ad revenues that include growth in that area of their business. After a period of recession, the economy may tilt in Reddit’s favor.
Reddit wants to translate its user growth into advertiser revenue growth. Its ambitious estimate is that its total addressable market globally from advertising alone, excluding China and Russia, will be worth $1.4 trillion. This is specifically talking about desktop and mobile web, display, video, and social direct response ads in addition to search advertising.
Reddit is not an enterprise SaaS business, so it has a different business model than most of startup-land. But if it manages to price its IPO well, and post some strong early trading results, it could help push some other late-stage, private-market tech companies off the sidelines and into IPOs. . Not only will this please your friendly local venture capital reporters, because we love the data we get from IPO filings as much as we love oxygen, the increase in public-market liquidity will also keep ventures sitting on paper for long periods of time. Will be a boon for investors. Returns that they would prefer to convert into cash.
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