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How Does Reddit Make Money? 6 Things to Know Ahead of Reddit IPO.

Reddit, internet message board turned collaborative institution, is now eying its own initial public offering (IPO). On Wednesday, Reddit announced that it had confidentially submitted a draft registration of a proposed common stock offering. There are few details currently available about the possible IPO. However, the rumor alone has investors and Redditors alike buzzing with anticipation.

The Reddit app and logo displayed on a smartphone screen.
Source: Tero Vesalainen / Shutterstock.com

A Reddit IPO is inarguably a jarring idea. After all, where exactly would Reddit Inc get its revenue from?

In September, Reuters reported on a private fundraising round in which Reddit was valued at $10 billion dollars. This time around, Reddit is allegedly targeting a $15 billion valuation. Considering some other high-octane IPOs of late, that seems achievable to many of Reddit’s biggest investors.

Reddit grew substantially this year after one forum, r/WallStreetBets, practically orchestrated a market malfunction on the site. Essentially, the “apes” at WSB concocted a scheme to pinch many of the investment firms shorting what they believed were undervalued stocks. Gamestop (NYSE:GME), AMC (NYSE:AMC) and other “meme stocks” hit unbelievable spikes as a result. Meanwhile, some hedge funds ended up bleeding money.

So, with its now illustrious history in finance, how far can a Reddit IPO take the discussion forum website?

6 Things to Know for the Pending Reddit IPO

  1. Reddit’s growing advertising revenue is likely the biggest justification for a public offering. In the second quarter, it reported pulling in roughly $100 million in advertising money, triple the number from the same time last year.
  2. In August, Reddit stated it was seeking to explore the audio and video fields, where ad revenue is far greater.
  3. Some of Reddit’s biggest investors are Fidelity Investments, Sequoia Capital and Tencent Holdings (OTCMKTS:TCEHY).
  4. Reddit was first founded in 2005, but has largely fallen behind quick-starts Twitter (NYSE:TWTR) and Meta Platforms (NASDAQ:FB) (formerly Facebook).
  5. This year, Reddit hired its first chief financial officer. The new CFO is Drew Vollero, formerly of Snap (NYSE:SNAP).
  6. Reddit joins a packed field of IPOs this year, with 785 companies going public in the first nine months of 2021. It remains interesting to speculate whether Reddit will opt for a traditional IPO or merge with a special purpose acquisition company (SPAC) as a quick and easy market entrance.

On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.


Article printed from InvestorPlace Media, https://investorplace.com/2021/12/how-does-reddit-make-money-6-things-to-know-ahead-of-reddit-ipo/.

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