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Reddit Goes Public with IPO | May 2024

Social media company Reddit made its stock market debut with a long-awaited initial public offering (IPO). Reddit filed the paperwork necessary to go public in 2021 but put its IPO plans on hold to focus on the company’s financial health. Reddit’s debut on the stock market is the first social media IPO since Pinterest in 2019.

Background

Reddit was founded by college roommates Steve Huffman and Alexis Ohanian in 2005. After nearly 20 years, it has grown to become one of the largest social media networks in the world with about 73 million daily users. is an online platform where users can share content, engage in discussions, and join communities called subreddits, which cover diverse topics ranging from news and entertainment to hobbies and niche interests.

Until the IPO, Reddit was a private company not publicly traded on the stock market, and its ownership was held by investors, founders, employees, and other private entities. Reddit was sold for $10 million to Condé Nast in 2006. In 2011, Advance Publications, Condé Nast’s parent company, spun Reddit off into an independent subsidiary. Over the years, the company raised funding from investors (such as Sam Altman of OpenAI, tech company Tencent Holdings, and financial services company Fidelity Investments) but Advance Publications remained the majority stakeholder.

Going Public

A private corporation that needs more money to expand or to take advantage of opportunities may have to obtain financing by “going public” through an IPO. This means the company becomes a public corporation by selling stock so that it can be traded in public markets.

Reddit decided to go public for two primary reasons: raising money and improving profitability. Reddit earns $800 million in annual revenue (largely through advertising) but has yet to turn an annual profit. Ads aside, Reddit is looking to grow other revenue streams to improve profitability such as data licensing.

The company invited its 75,000 top users to purchase shares in the IPO before stock trading started to foster loyalty. Other companies to do this include Airbnb, Doximity, and Rivian.

In the Classroom

This article can be used to discuss types of corporations (Chapter 4: Options for Organizing Business).

Discussion Questions

  1. What is an IPO?

  2. Why did Reddit decide to go public?

  3. How did Reddit foster loyalty with its users through the IPO?

This article was developed with the support of Kelsey Reddick for and under the direction of O.C. Ferrell, Linda Ferrell, and Geoff Hirt.


Sources

Corrie Driebusch, "Reddit Plans to Sell Stock to Loyal Users in Unusual IPO Wager," The Wall Street Journal, February 21, 2024, https://www.wsj.com/finance/stocks/reddit-stock-ipo-buyers-users-58744446  

Corrie Driebusch and Sarah E. Needleman, "Reddit Shares Soar in Long-Awaited IPO," The Wall Street Journal, March 21, 2024, https://www.wsj.com/finance/stocks/reddits-stock-jumps-in-ipo-9b1536ee

Jonathan Vanian, "Reddit Pops 48% in NYSE Debut after Selling Shares at Top of Range," CNBC, March 21, 2024, https://www.cnbc.com/2024/03/21/reddit-ipo-rddt-starts-trading-on-nyse.html

Steve Inskeep and Bobby Allyn, "Reddit IPO: Why Does Reddit Want to Become a Public Company?" NPR, March 21, 2024, https://www.npr.org/2024/03/21/1239814862/reddit-ipo-why-does-reddit-want-to-become-a-public-company

About the Author

O.C. Ferrell is the James T. Pursell Sr. Eminent Scholar in Ethics and Director of the Center for Ethical Organizational Cultures in the Raymond J. Harbert College of Business, Auburn University. He was formerly Distinguished Professor of Leadership and Business Ethics at Belmont University and University Distinguished Professor at the University of New Mexico. He has also been on the faculties of the University of Wyoming, Colorado State University, University of Memphis, Texas A&M University, Illinois State University, and Southern Illinois University. He received his Ph.D. in marketing from Louisiana State University.

Profile Photo of OC Ferrell