At the upper end of a marketed range, Reddit has valued its shares at $6.4 billion (£5 billion), valuing the social media platform.
It has amassed $748 million through the sale of 22 million shares at $34 each, making it one of the social media company’s most extensive initial public offerings (IPOs).
On Thursday, the shares will be traded on the New York Stock Exchange.
Unusually, the company extended an offer to some of the platform’s users for shares; however, the number of users who accepted the offer has yet to be disclosed.
Since its inception nearly two decades ago, Reddit has grown to become one of the most visited websites on the planet.
It is an online forum where individuals can engage in discussions pertaining to subjects of personal interest. As of the conclusion of December 2023, the number of consumers surpassed 73 million, as reported by the organization.
However, the filing raises an issue that has been simmering in the background for years: how can a company profit from what are, in essence, arbitrary discussions?
Reddit is accessible to all users without charge; it is entirely free to peruse, post, and comment.
It has been profitable-free for the past two decades, and some may question Reddit’s valuation of billions of dollars if it has never generated revenue.
It has attempted a few things, and in 2017, a substantial redesign rendered the site more advertiser-friendly.
With AI models as its foundation, Reddit’s path to profitability has reached its conclusion.
This is because organizations such as OpenAI, the ChatGPT developer, will reimburse for the data pertaining to those arbitrary dialogues.
It is believed that Google paid Reddit $60 million for the right to examine nearly two decades of discussions regarding how to make its artificial intelligence more human-like. Reddit has stated that it has reached licensing agreements worth over $200 million over the next two to three years.
Reddit reported a $90.8 million loss in 2023 in February; therefore, the funding from artificial intelligence (AI) companies could turn around the platform.
Accusations and inquiries
On the horizon, however, are also a multitude of concerns for Reddit.
One primary concern is that regulatory bodies are increasingly scrutinizing the social media platform.
Already, the US Federal Trade Commission (FTC) is investigating how Reddit licenses its data for AI models; in general, regulators dislike it when large technology companies sell user-generated data.
Although the platform may have anticipated this outcome, it may have been taken by surprise when mobile phone manufacturer Nokia filed a challenge, alleging that it violated its patents.
“We will evaluate their claims,” Reddit stated, adding that it has previously been the target of comparable allegations.
Reddit’s disclosure to the Securities and Exchange Commission (SEC), the US financial markets regulator, that its users represent a potential risk associated with owning shares of the company is perhaps the most significant aspect of its filing.
The filing stated that the company’s prospects and operations would suffer if it failed to add or retain users or if user engagement decreased.
In the event that Redditors discontinue providing content or if their contributions fail to resonate with fellow Redditors in terms of value or appeal, our services and products may encounter a reduction in user traffic, potentially leading to the attrition of advertisers.
It has been shared for Reddit users to respond angrily to modifications implemented on the platform.
Their aversion to recent changes is so pronounced that a search for chief executive Steve Huffman (username u/spez) on the platform reveals that Redditors frequently prefaces his mentions with profanity.
Threats to abandon the platform, such as the outage that rendered a significant portion of Reddit inoperable in 2023, have frequently been ineffective despite mounting discontent.
Moreover, despite attempts to establish an alternative platform, Reddit’s greatest strength is that it needs a formidable competitor.
Although Redditors may express apprehension, the social media platform is operating relatively securely when it associates its stock market value with its users’ inability to seek alternatives.
