【Kurt Meinicke】

Reddit is Kurt Meinickeofficially going public. The social media platform finally filed its initial public offering (IPO) with the Securities and Exchange Commission on Thursday, ahead of its expected stock market debut in March. 

It also announced that it's reserving some shares specifically to sell to its users and moderators. Whether they'll actually want to buy them is another question.

Reddit's shares will be listed on the New York Stock Exchange under the ticker symbol RDDT, though exactly how many will be up for grabs hasn't been determined. Reddit's filing is the first significant social media IPO since Pinterest in 2019, with the company having worked toward going public since 2021. While Reddit kept pushing back these plans due to factors such as fluctuating markets and high interest rates, this week's IPO is a strong indication that it's finally ready to take the plunge.

"We are going public to advance our mission and become a stronger company," Reddit co-founder and CEO Steve Huffman wrote in an open letter included in the filing. "We hope going public will provide meaningful benefits to our community as well."

Interestingly, Reddit's IPO filing also revealed that OpenAI CEO Sam Altman is one of the company's largest shareholders, with 8.7 percent of the company's stock. He also has 9.2 percent of the voting power — significantly more than Huffman's 3.5 percent. Altman sat on Reddit's board of directors for seven years before stepping down in Jan. 2022.

Reddit is $716.6 million in deficit

Thursday's filing acknowledges that Reddit has "incurred net losses since [its] inception," losing $90.8 million last year and $158.6 million the year before. As of the end of 2023, the company had accumulated a deficit of $716.6 million. This daunting number is unlikely to significantly shrink any time soon, especially if Reddit's cost-cutting efforts and revenue-raising projects don't bring in enough to offset its growing operational costs.

However, Reddit did note that its 2023 revenue was up 21 percent from 2022, so at least the bleeding appears to be slowing. The company also has plans to boost its revenue via multiple means.

"We have many opportunities to grow both the platform and the business, the latter through advertising, monetizing commerce on the platform, and licensing data," Huffman wrote, later adding that he expects Reddit's data to be "a key element" in training future generative text AI models. "Our work to make Reddit faster, easier to use, easier to moderate and govern, and simpler to navigate and find relevant communities is driving growth today and will continue to be our focus into the future."

Users have already begun seeing the impact of Reddit's finance-fuelled changes over the last several months — and many have been incredibly unpopular. Last week, Bloomberg reported that Reddit had signed a $60 million content licensing deal allowing its data to be used to train AI. In September, Reddit removed the option to opt out of ad personalisation. 

Perhaps most infamously, last year Reddit began charging developers for access to its application programming interface (API). The widely derided decision prompted many of its moderators to shut down their subreddits in protest, though Reddit eventually forced them back open by threatening to remove the volunteers. This did catastrophic damage to the relationship between Reddit and its moderators, tearing a rift which doesn't look likely to heal any time soon.

Considering this, more than a few moderators will probably be less enthusiastic about snapping up Reddit shares than they might have been a few years ago. The moderators' protest also had enough of an impact that Reddit cited and noted it as a risk in its IPO filing.

"While these activities have not historically had a material impact on our business or results of operations, similar actions by moderators and/or their communities in the future could adversely affect our business, results of operations, financial condition, and prospects," read the filing.

How to get Reddit's Redditor-only shares

While Reddit will offer its users first dibs on buying its stocks, this doesn't mean you can simply show up to Wall Street and show someone your profile. A percentage of shares is being reserved for a directed share program, and will be directly offered to "eligible Reddit users and moderators" at a yet to be determined initial public offering price.

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"Our users have a deep sense of ownership over the communities they create on Reddit," Huffman wrote. "We want this sense of ownership to be reflected in real ownership — for our users to be our owners."

To be eligible, you must be over 18, live in the U.S., and have created a Reddit account on or before Jan. 1. You must also be "in good standing" on the platform and have never worked for Reddit. 

Eligible users will be invited to purchase Reddit shares in a phased six-tier priority system, with Redditors grouped according to their "community contributions." Average Redditors will be evaluated by their karma — a reputation score dictated by other users' upvotes and downvotes on their posts — while moderators will be assessed according to the work they've done.

Tier 1 offers will be made to "certain users and moderators identified by [Reddit] who have meaningfully contributed to Reddit community programs." Tiers 2 to 5 will then work down from users with 200,000 karma and moderators who have done a minimum of 5,000 moderator actions, to those with 25,000 karma and 500 moderator actions. Finally, Tier 6 will include "all other eligible users and moderators."

It can be exciting to feel like you've been offered an exclusive investment opportunity. Still, regardless of how many hours you've spent devouring stories on r/AITA, you should still do your research before investing in any company. Significant financial decisions should never be taken lightly, no matter how good your Reddit karma is.