Highlight: "Markets in Review" Issue #7

Reddit’s Alternative Offering

On Thursday, the 22nd, Reddit filed an S-1 registration statement with the SEC, providing the public access for the first time, to both financial and usage insights about their company, as part of the process of becoming a publicly listed, on the New York Stock Exchange.

After more than 20 years of existence, the company remains unprofitable, with a net loss declared of $90.8 million in 2023. It looks like the financials of Reddit are very similar to the last data we saw from Twitter; a company able to generate a reasonable amount of advertising revenue but failing to identify and execute on profitable and sustainable business model.

The company intends to allow moderators and users with a karma score of at least 2,000 to purchase shares before the IPO, a bold move for Reddit’s IPO, as this is privilege usually reserved for large institutional investors. While we have come to learn that Reddit had 500 million visitors last December, we do not see a path for profitability in the near term, questioning their decision to IPO and sell shares to their users. In Reddit’s entire existence, the company has never compensated their content creators, and instead of developing a monetization strategy, they are choosing instead, to share in their profits (or losses apparently).

This is an unusual move for a company wishing to become public, during a period where the IPO market is barely alive, especially and after the rise and fall of SPACs. This market continues to evolve, seemingly becoming more inclusive of a new shareholder base that was always on the outside looking in.

Is this the mark of a golden revival for IPO’s market, or a new tool for the exploitation of those who lack financial literacy?

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