Exclusive-Reddit looking to launch IPO in March: sources

© Reuters. FILE PHOTO: The Reddit app is seen on a smartphone in this illustration taken July 13, 2021. REUTERS/Dado Ruvic/Illustration/File Photo

By Echo Wang and Anirban Sen

(Reuters) – Social media platform Reddit has drawn up detailed plans to launch its initial public offering (IPO) in March, moving forward with a listing it has been considering for more than three years, according to people familiar with the matter.

It would be the first initial public offering by a major social media company since Pinterest's (NYSE:) debut in 2019, and would come as Reddit and its peers face stiff competition for advertising dollars from companies like TikTok and Facebook.

The offering would also test the willingness of some Reddit users to support the company's stock market debut. Many investors posting on the platform have helped fuel dozens of “meme” stock rallies over the past three years, from retailer GameStop (NYSE 🙂 to movie operator AMC Entertainment (NYSE 🙂 Holdings.

Reddit, which confidentially filed its IPO in December 2021, plans to make its public filing in late February, launch its tour in early March and complete the IPO by the end of March, two of the sources said.

The San Francisco-based company, which was valued at about $10 billion in a funding round in 2021, is looking to sell about 10% of its shares in the IPO, the sources added. It will decide what IPO valuation it will seek closer to listing time, according to sources.

The sources warned that Reddit's IPO plans could be delayed, as has happened in the past, and asked not to be identified because these are confidential deliberations.

A Reddit spokesperson declined to comment.

Founded in 2005 by web developer Steve Huffman and entrepreneur Alexis Ohanian, Reddit became best known for its specialized discussion groups and its users voting “up” or “down” on content posted by other members.

The company, which generates its revenue primarily through advertising and also offers premium access for $5.99 a month, has yet to turn a profit, Huffman said in a Reddit post last June.

In the past, the company attributed its losses to investment in the platform since its users participate less in advertising on its site than on other social networks.

The company held off on pulling the trigger on the IPO until it approached profitability. Bouts of market volatility that shut down the IPO market for much of the past two years also helped delay its plans.

Reddit expected to generate just over $800 million in ad revenue in 2023, more than 20% more than the previous year, The Information reported last month.

Reddit said last year that it would charge companies for access to its application programming interface (API), which is used by technology companies to train large language models used in artificial intelligence. The move upset some users who rely on third-party apps to access Reddit.

Big social media stocks have rallied over the past year, driven primarily by a rally in technology stocks as interest rates peaked. Shares of Meta Platforms (NASDAQ:), which operates Facebook, have tripled in value over the past 12 months, while Snap shares are up 60% over the same period.