Reddit's IPO Filing Reveals A $91M Loss And An Investing Twist
In 2005, a small social media startup called Reddit came online, not knowing that it would balloon over the next nearly 20 years into a giant in the industry. As it stands, Reddit has over 100K active communities, with more than 73 million active daily unique users visiting these communities. These people post content, write comments, and engage with each other in a way not seen elsewhere on the Internet as the era of forums and niche communities fell away. With this scale, it has come time for Reddit to advance its mission, become a stronger company, and provide benefits to the community.
The SEC published the Reddit, Inc. Form S-1 Registration Statement, reflecting this sentiment and some other interesting details about the company. For example, we now know that Reddit employs 2,013 people nicknamed Snoos, 1,619 of whom are based in the United States.
Regarding the business and financials, Reddit saw a $137.3 million increase (up 21%) in revenue to a little over $804 million from 2022 to the end of 2023 on December 31st. However, Reddit also reported an overall loss of 11% for 2023, with one of the biggest spending areas being “Research and development” ringing up at $438.3 million. This R&D is up 20% since last year, though “primarily due to an increase in employee-related costs, which was driven mainly by an increase in salaries and an increase in headcount of 7%, and an increase in infrastructure costs to support our growth strategy.”
In this filing, we also get to hear about Reddit’s stance on artificial intelligence and its data, noting that “[Reddit’s] content is particularly important for artificial intelligence (“AI”) – it is a foundational part of how many of the leading large language models (“LLMs”) have been trained.” This does not come as a surprise, given the recent news about Reddit’s selling of data to train AI models. Further, Sam Altman of OpenAI fame was formerly a member of the Reddit Board of Directors and has some stock ownership of the company, so the push for AI makes sense and likely raises quite a bit of capital for a site with a significant amount of user-generated content.
We hope to see more of how this public offering will play out soon, as there are other interesting notes in this filing that we do not know much about. For example, there is a note in the filing about Reddit offering qualifying users and moderators who’ve contributed to Reddit to buy shares in the IPO alongside investors through a directed share program. If anything, it sounds like Reddit is trying to be very user-forward with the offering, and which is nice to see.
