Reddit is a popular community forum where people share content about a wide range of interests, from cryptocurrencies to travel. Founded in 2005, it has continued to spur some discussions that have even rocked Wall Street. For example, a stock discussion became the GameStop saga in 2020. The Reddit IPO has been in the news as one of the upcoming 2022 IPOs, ever since the company filed for a public offering in December 2021.
Conde Nast acquired the site in 2006 and has had investments from high-profile players such as investors marc andresen, Peter Thiel, Ron Conway, Snoop Dogg and Jared Leto. In August 2021, after a round of fundraising, Reddit’s valuation was set at over $10 billion.
The Reddit IPO
The company was founded by University of Virginia roommates Steve Huffman and Alexis Ohanian along with Aaron Swartz in 2005.
Today, Reddit is one of the largest websites on the Internet where people come together to share opinions, discuss current events, and anything else that interests them. By functioning as the Internet’s bulletin board, Reddit IPO is supposed to help the company expand its reach. and compete with your competitors’ offerings.
The site offers a similar platform to connect as its competitors Facebook, Twitter, Snapchat, LinkedIn, among others. Reddit had always enjoyed solid growth until the pandemic hit. Experts say the company saw its number of daily users plateau between 2020 and 2021. It is still building its ad revenue and generated around $350 million in 2021, mostly from advertising.
Reddit is known for promoting freedom of expression. However, this led to a lot of controversies and constant changes in the moderators. In total, the company has raised nearly $1.3 billion in funding in 10 rounds. He has managed to attract investors from seasoned angels to elite venture capitalists, bringing with him a wealth of strategic experience and business acumen. The company was initially expected to launch Reddit’s IPO in 2022, but has postponed it for now. There is no clear communication on the date of the Reddit IPO, although speculation abounds that it will happen in late 2022.
Why 2022 is a bad idea for a Reddit IPO
Wall Street will attest that 2022 has been a bad year for public offerings. Most stocks have fallen well below their IPO debut price, while others have had to slash their valuations to go public.
High inflation and predictions of a recession have investors scrambling to seek long-term assets with guaranteed returns. Most investors have shied away from the riskier bets and are unwilling to part with funds unless they can see a clear growth path ahead. Recent reports also indicate that inflation could rise further. In such cases, investing in an IPO is a tricky business, with more risks than rewards.
In recent years, Reddit has focused on improving the user experience and driving growth. Although Reddit’s valuation went from $6 billion in February 2021 to $10 billion in August of the same year, there have been no updates on its valuation for over a year. Most of the companies that launched their public offerings this year have had to cut their valuations by almost half.
“Investors are really risk averse right now, and that’s what’s really affecting the lack of activity that we’re seeing,” Rachel Gerring, IPO lead at EY Americas, told CNBC. “They are looking for companies that are more focused on growth and profitability rather than growth at all costs that we were seeing in 2021.”
Analysts have mentioned that in the past two years growth has stalled for the social media company, and the Reddit IPO might not be as valuable as it once was. Although the Reddit IPO is expected to fund expansion plans, there is no word on how the company plans to move forward. For now, we need to keep an eye on Reddit news and announcements.
The downturn in the market also means that it might be more economically viable to wait a bit longer rather than have Reddit’s IPO this year.