New investors shouldn't call Reddit (RDDT) an AI play, even after striking a lucrative deal with tech beast Google (GOOG, GOOGL).
says co-founder and CEO Steve Huffman.
“I think people should look at Reddit as a community platform with a lot of paths to success,” Huffman told Yahoo Finance Live on Thursday, as his 19-year-old company went public on the New York Stock Exchange.
Huffman said that while Reddit is pursuing more deals to feed data into its large-scale language models (LLMs), the company is also aiming to capture a larger slice of the advertising pie.
Initially, the IPO price was expected to be in the range of $31 to $34 per share, but Reddit ultimately priced the IPO at $34 late Wednesday, giving it an initial valuation of $6.4 billion. .
The target valuation on a fully diluted basis was lower than the $10 billion valuation it received in its 2021 funding round.
As of 12:15 p.m. ET, Reddit stock had not yet begun trading. The initial price was expected to be in the range of $42 to $48 per share.
Reddit is the first major social media IPO since Pinterest (PINS) debuted in 2019.
Road to Reddit IPO
It's been a long and winding road for Huffman, an avid ballroom dancer in college, and the Reddit team to reach Thursday's IPO.
The company, which Huffman frequently describes as a democratic community rather than a social media platform, was founded in 2005 by Huffman and his friend Alexis Ohanian.
A year later, the two reportedly sold Reddit to Condé Nast for $10 million. Huffman remained with the team until his contract expired in 2009, while Ohanian left in 2010.
Condé Nast's parent company Advance Publications spun off its business in 2011. After replacing two CEOs, Reddit brought Mr. Ohanian back as executive chairman in 2014 and brought Mr. Huffman back as CEO a year later.
Since then, Huffman has moved into hot-button content moderation topics on the platform, ran the business during a meme stock rally, and pivoted the company to leveraging advertising dollars.
Most recently, Reddit signed a $60 million deal to license its data to help Google train LLMs. The possibility of further AI licensing deals was a key pitch to investors during the IPO roadshow.
Ohanian resigned in 2020, saying he wanted to give the board seats to diverse candidates. Interestingly, any mention of him was left out of Reddit's prospectus.
Despite being in business for nearly 20 years, Reddit has never turned a profit. The company's sales last year were $804 million, up 21% from the previous year. Net loss was $90.8 million. It has around 73 million daily users.
When asked if the adjusted profits achieved in late 2023 would continue into 2024, Huffman said, “We like the trend we're going with,” and asked whether Reddit would be profitable in 2024. avoided making a statement.
Other facts you should know:
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AI king Sam Altman and Chinese tech giant Tencent are Reddit's fourth and second largest shareholders, respectively.
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Mr. Huffman's total compensation for 2023 is $193.2 million, including $93.7 million in option compensation and $98.3 million in stock awards.
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Key takeaways from SEC filings: “Stephen Huffman, our Chief Executive Officer, has determined that upon the achievement of the vesting conditions that are deemed to be satisfied based on the Company achieving a $5 billion market. We have 662,447 PRSUs outstanding as shares of our Class B common stock” capital valuation following this offer. ”
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The GameStop (GME) and AMC (AMC) meme stock trading story was mentioned in the company's risk factors section.
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1.76 million shares were reserved for purchase by the Reddit user base.
Brian Sozzi I'm the executive editor of Yahoo Finance. Follow Sozzi on Twitter/X @BrianSozzi And even more linkedin. Have a tip about a deal, merger, activist situation, or more? Email brian.sozzi@yahoofinance.com.
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