Netizen’s Concerns Rise Over Upcoming Reddit IPO

Netizen’s Concerns Rise Over Upcoming Reddit IPO


On February 22nd, Reddit officially filed for an initial public offering (IPO) with the U.S. Securities and Exchange Commission. That action prompted its more than 73 million daily active users to ask where exactly the platform is heading.

Recently, Reddit began distributing invitations to a handful of seemingly veteran contributors on the site to participate in their IPO. The door for others will likely open in early March as part of a direct share program.

News of the IPO stirred serious concern amongst Reddit fans. The site, who’s major success is attributed mainly to its promise of freedom of speech, will soon be bound to follow the rules and regulations required of a publicly listed company.

This could significantly impact Reddit’s more abstract forums, referred to as Subreddits, and the often controversial content posted there.

Questions of Censorship

Many users are deeply devoted to the Subreddits they frequent and participate in regularly without fear of censorship. This is where those loyal to the platform have been expressing concerns over its future outlook. 

Current patrons appear disillusioned with the lack of communication surrounding the IPO announcement. After all, the more than 100,000 active communities require someone to run them, and such positions are currently unpaid. This issue is one main concern amongst veteran users as to where potential profit from a public offering may go.

Based on conversations on the platform, many are left wondering about possible future limitations. Some of the most common concerns are regarding whether the site will eventually require all users to pay for use, and if certain topics could be banned altogether. Reddit executives have yet to address these queries.

A Financial Conundrum

One of Reddit’s biggest struggles to date has been monetizing the platform. The free-form user-based content is unwieldy and difficult to attach ads to. A premium membership is available with exclusive perks for $4.99 per month, income which only accounts for a small percentage of the company’s overall revenue. 

Despite churning out about $804 million in revenue in 2023, net losses eclipsed the $90 million mark. Growth may not be out of the question though, as these figures show an improvement from $158 million in losses the previous year.

As Eric Yaverbaum, PR specialist and CEO of Ericho Communications explains, “At the end of the day, Reddit is a business, and it needs to find a way to make money, but doing so at the expense of the users who’ve made its platform valuable in the first place could be its undoing.

“We’ve seen firsthand, on more than one occasion, how powerful Reddit users can be when they organize. Overlooking the value Reddit’s users have created for the company in pursuit of profit may ultimately prove counterproductive. The company needs to find a way to move forward with its IPO in a way that doesn’t leave behind its most valuable assets.”

Past Results = Future Performance?

This is the second time Reddit has pursued an IPO. The company originally made a bid in 2021, but changed its mind amid rising inflation and the more than 1,000 other initial public offerings filed that same year.

There has been no indication of what the initial share price may be at this time, or an exact date for the offering. However, speculation is that the target is between $31 an $34 a share. Current significant share owners include Fidelity, Tencent, and OpenAI CEO Sam Altman of ChatGPT fame.

A fundraising initiative from 2021 brought in $410 million, valuing the company at more than $10 billion at the time. Reddit has since lowered that valuation, now seeking just $6.5 billion. The stock is set to be listed on the NYSE under ticker symbol RDDT sometime this year.

The site may see a solution to its profit problem in the form of artificial intelligence, which according to a Goldman Sachs report, is a trend that is becoming increasingly popular with investors. Like many other companies, Reddit has been eyeing such technology for some time.

A recent partnership with Google suggests that the social media platform may be ready to take action. Tapping into Google Cloud should allow the site to help people find and engage in the content and communities they are most interested in.

What Came Before

In the height of the social media craze at the start of the millennium, Reddit launched in June 2005 as a one-stop-shop for news and information. Toted as the “front page of the internet,” the Reddit founders left it up to users to submit content from around the web.

The site still manages to stand apart from other social media platforms thanks to its unique voting system. The most popular articles rise to the top and slowly fade away over time unless users continue to “upvote” them. This system keeps new content churning to the top and gives readers a chance to participate.

This article was produced by Media Decision and syndicated by Wealth of Geeks.

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