Reddit, the community-focused message board site, filed to go public on Thursday, paving the way for it to be the first major social media company to debut on the stock market in years and a test for private companies after a drought in initial public offerings.
In an offering prospectus, Reddit disclosed its financial performance in preparation for selling shares to investors. The San Francisco-based company reported that its revenue rose more than 20 percent as its losses narrowed last year. It added that it had 73 million daily users and more than 100,000 active communities.
The prospectus kicks off a process to the stock market, with the 18-year-old company set to meet potential investors to whet their appetites for buying its shares. Reddit could go public on the New York Stock Exchange in a matter of weeks under the stock symbol RDDT. Reddit’s bankers are seeking a valuation of at least $5 billion in its I.P.O., according to two people familiar with the matter. That is roughly half of the $10 billion valuation the company fetched in a 2021 private financing round. The talks are continuing, and the price could still rise or fall in the weeks ahead.
Reddit is the last of an earlier generation of social media companies to aim for the stock market, after Facebook’s high-profile offering in 2012, Twitter’s in 2013 and Snap’s in 2017. In the years since, the social media industry has changed, facing scrutiny for misinformation, hate speech and other effects. Some of the companies have shifted directions; Facebook was renamed Meta, and Twitter was bought by Elon Musk, who took the company private in 2022 and renamed it X.
Reddit’s move is also highly anticipated after a lull in initial public offerings. Just 108 companies went public in the United States last year, roughly a quarter of the number that debuted in 2021, according to data compiled by Renaissance Capital. Some of the biggest tech offerings last year were Arm, a chip designer, and Instacart, a grocery delivery company.
“We are going public to advance our mission and become a stronger company,” Steve Huffman, Reddit’s chief executive, said in a founder’s letter included in the prospectus. “We hope going public will provide meaningful benefits to our community as well. Our users have a deep sense of ownership over the communities they create on Reddit.”
Mr. Huffman added that the company wanted “this sense of ownership to be reflected in real ownership — for our users to be our owners” and that “becoming a public company makes this possible.” Reddit said it would reserve a chunk of its shares at the I.P.O. price for 75,000 of the company’s most prolific users if they wished to purchase them.
In its prospectus, Reddit said revenue in 2023 was $804 million, up about 21 percent from $666 million a year earlier. The company lost $90 million in 2023, compared with a $158 million loss the year before, according to the prospectus.
Some of its largest shareholders include Advance Magazine Publishers, Tencent Cloud Europe, Vy Capital, Fidelity Management, and Sam Altman, a former Reddit board member and the chief executive of OpenAI.
Reddit’s path to the public markets has been long and rocky. Founded in a University of Virginia dorm room in 2005 by Mr. Huffman and Alexis Ohanian, the site began as a destination for anonymous users to come together and discuss anything from popular TV shows, to guitars, makeup and power washers.
The site was unique in that it largely focused on tightknit communities, mostly anonymous, all moderated by volunteers who self-governed their forums, or “subreddits,” based on rules of their own making. It became known for “A.M.A.s,” otherwise known as the “ask me anything” sessions, sometimes with public figures like former President Barack Obama, Microsoft’s Bill Gates and the actor Nicolas Cage.
The company raised hundreds of millions of dollars in funding over the years, including $250 million and more than $410 million in two financing rounds in 2021. Investors include Fidelity Investments, Andreessen Horowitz, Sequoia Capital and Tencent Holdings. Like other early social networking efforts, Reddit initially eschewed offering advertising and making money. It instead focused on forms of revenue that came from community ideas, like a user-generated e-commerce system and awards that users could buy one another. Those ideas are still in play.
Reddit eventually embraced advertising based on its topic-focused communities. Brands like Laneige, for instance, targeted ads to a forum called Makeup Addiction, one of the most active subreddits, in which users discuss cosmetics and how to apply them.
The site has also built an emerging data licensing business based on its enormous corpus of conversation data, which has become increasingly important amid a frenzy over artificial intelligence. A.I. models are trained on gobs of such data so that they can become more powerful. On Thursday, Reddit announced a licensing deal with Google, which has used Reddit data to train and build its A.I. systems.
“We expect our data advantage and intellectual property to continue to be a key element in the training of” future A.I. models, Mr. Huffman said in the letter. The company has a number of undisclosed licensing agreements to use its data and expects to make upward of $203 million over the next three years from those contracts, according to the filing.
The site has had its share of struggles. It faced controversy after controversy over its refusal to moderate communities in its early years, including its role in spreading misinformation during the Boston Marathon bombing in 2013, and hosting racist and misogynistic content in some of its smaller subreddits. Last year, Reddit faced a user revolt after changing some of its rules and restricting third-party developers from using the site’s content without paying for it.
Reddit has reversed its position on moderation and has updated and more strictly enforced its policies in recent years, making it more attractive for marketers to place advertising across the site.
The company also had a revolving door of leaders in its first decade, being helmed by four chief executives before Mr. Huffman returned to lead the site in 2015.
Reddit cautioned potential investors that it faced challenges and potential risks as a public company, including the rise of large language models, the underlying A.I. systems that could potentially aggregate and synthesize the site’s content and let users view Reddit without visiting the site or seeing advertising.
The company may also face difficulty courting brands in a digital ad market dominated by Meta and Google.
“Reddit may face a daunting challenge in growing its advertising business, given the gap between its platform’s capabilities and those that are best in class,” said Eric Seufert, an independent mobile analyst who closely monitors social media companies and advertising.
The company also warned that it was heavily dependent on its community for moderating the platform, and that future revolts or departures could harm the site.
“We have many opportunities and much to do,” Mr. Huffman said.
Lauren Hirsch contributed reporting from New York.
