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Reddit plans to IPO and invites investment from active users

Reddit plans to IPO and invites investment from active users
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Reddit has filed an S-1 statement with the Securities and Exchange Commission (SEC), detailing its finances and business goals ahead of its initial public offering (IPO) on the New York Stock Exchange under the symbol RDDT.

In this document, Reddit claims that last year it generated $804 million in revenue, the vast majority of which came from advertising (98%). However, the company is unprofitable, with a net loss of $90.8 million in 2023. The service has 267.5 million weekly active users, over 100,000 active communities, and 1 billion posts.

Reddit is providing an unusual opportunity for an unspecified number of its top users, including moderators and those with high karma scores, to purchase shares in the IPO. This is a privilege typically granted to professional investors who want to buy shares at a theoretically lower price before everyone else can buy them on the public market.

Reddit will distribute shares through a multi-tiered system, starting with "certain users and moderators identified by us who have made significant contributions to Reddit community programs." Following this initial level, shares will be offered to people with a karma score of at least 2000 and those who have "performed at least 5000 moderation actions." The company says it has reserved 1.3 million shares of its Class A stock "to finance community-related programs that enable Redditors to bring their ideas to life."

As part of its monetization strategy, Reddit mentions data licensing and AI model training. The company previously announced a deal with Google to train artificial intelligence systems, which will bring in $60 million annually.

Interestingly, the CEO of rival company OpenAI, Sam Altman, has invested over $60 million in Reddit shares and controls 9.2% of Reddit's votes. Altman first invested in Reddit in 2014 when he was the president of the Y Combinator accelerator and continued to invest in 2021, increasing his stake in the company.

Source: The Verge, CNBC

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