Reddit IPO Continues Altman's 2024 Hero Run

Also Google is having a bad time and Substack is having a great time

The Reddit S-1 just dropped and somehow Sam Altman winning is still the headline. Exciting times for tech generally though in what could be another step in the right direction for IPO markets. Full writeup with some data points at the bottom. Meanwhile, Google’s Gemini AI model is having a tough time and Substack is having a great time.

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Reddit files to list IPO on NYSE under the ticker $RDDT

“Reddit said it had $804 million in annual sales for 2023, up 20% from the $666.7 million it brought in the previous year, according to the filing. The social networking company’s core business is reliant on online advertising sales stemming from its website and mobile app.”

Full writeup from me with some data points at the end.

Google’s ‘Woke’ Image Generator Shows the Limitations of AI

”Google has admitted that its Gemini AI model “missed the mark” after a flurry of criticism about what many perceived as “anti-white bias.” Numerous users reported that the system was producing images of people of diverse ethnicities and genders even when it was historically inaccurate to do so. The company said Thursday it would “pause” the ability to generate images of people until it could roll out a fix.”

Substack says it now has more than 3 million paid subscriptions

“Substack on Thursday will announce that more than 3 million customers subscribe to paid newsletters on its platform, up from 2 million announced last year and 1 million in 2021.”

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Reddit 2006 from left to right: Christopher Slowe (1st employee), Alexis Ohanian (co-founder), Steve Huffman (co-founder/current CEO)

Letters From The Editor

Misc. (short for miscellaneous)

Reddit IPO: Price and Story

You can check out the full S-1 here if it’s of interest. Depending on how deep in the finance game you are most of it won’t be super relevant. There are some high level stats/graphics that are helpful though and I personally enjoyed the letter from Steve Huffman. Reddit really is a special part of the internet.

On the pricing side: News came out a few weeks ago that they were advised to target “at least $5B” which generally seems to line up with where secondary markets have been trading. Here’s some data from to show you how the private markets have been treating Reddit over the course of this last year:

This $5B price target is a 50% haircut from the $10B valuation they raised their Series F at back in 2021. This doesn’t seem as much a Reddit problem though as a pretty typical market movement among the most actively traded/sought after late-stage VC backed cos. Here I’m able to compare the Reddit price chart to the Notice 50 index and see that it was definitely one of the more frothy bull run names, but that ultimately it has found itself in a similar area to the rest of the index:

The scariest thing that Reddit dealt with in this push to IPO is the community not being very supportive. Which, for a community business, was tough. You might remember headlines like “Reddit’s Moderator Revolt Casts Shadow on Potential IPO” back in June of this last year.

That generally seems to have quieted down though and Reddit is taking steps to try to involve the most active Redditors in the IPO itself through allowing them to buy shares in the offering. You can read more about that here.

Away from the perceived value of the company and into the cash story - Reddit is still not profitable, but they’re not far off and seem to be moving in the right direction. They grew revenue from $666M in 2022 to $800M in 2023. They posted a net loss of $159M in 2022 and brought that down to a loss of $91M in 2023.

The general perception of tech twitter seems to be positive with some people are even calling for a price target closer to $7B and and upsized offering of $750M. Overall, I find myself in a similar camp. I’m not sure I’d push as high as $7B given where private markets have been for the last year, but the prospects of Reddit remaining a pillar of the internet seem strong and momentum is pushing in the right direction. Also r/WallStreetBets is bullish so there’s that:

Very last thing worth mentioning: Sam Altman apparently owns 4.5% of Reddit and is set to have ~$200M more liquid net worth upon IPO. For context: Steve Huffman, the co-founder/CEO, owns 2.1%.

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Talk soon,

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