New investors shouldn't call Reddit (RDDT) an AI play even after a lucrative deal with tech beast Google (GOOG, GOOGL).
Or so says co-founder and CEO Steve Huffman.
"I think they should look at Reddit as a community platform that has many paths to success," Huffman told Yahoo Finance Live on Thursday, as his 19-year-old company went public on the New York Stock Exchange.
Reddit is pursuing more deals that feed its data to large language models (LLMs), according to Huffman, but the company is also aiming to grab a bigger piece of the advertising pie.
Initially expected to price its IPO in the $31 to $34 per share range, Reddit ended up pricing its IPO at $34 late Wednesday, giving it a $6.4 billion valuation initially. The targeted valuation on a fully diluted basis was less than the $10 billion it fetched in a 2021 funding round.
The stock began trading early Thursday afternoon at $47 per share and quickly shot past $53.
Reddit is the first major social media IPO since Pinterest (PINS) debuted in 2019.
The Road to the Reddit IPO
It's been a long, winding road for Huffman — an avid ballroom dancer in his college days — and the Reddit team to reach the Thursday IPO.
The company — which Huffman frequently says is not a social media platform but a democratic community — was founded by Huffman and friend Alexis Ohanian in 2005.
The pair sold Reddit to Conde Nast a year later for a reported $10 million. Huffman stayed on until his contract ended in 2009. Ohanian left in 2010.
Conde Nast's parent company Advance Publications spun off the business in 2011. After churning through two CEOs, Reddit brought back Ohanian as executive chairman in 2014, then Huffman as CEO a year later.
Since then, Huffman has waded into hot-button content moderation topics on the platform, run the business during the meme stock uprising, and pivoted the company to capitalize on advertising dollars.
More recently, Reddit struck a $60 million deal to license its data to help train Google's LLMs. The potential for more AI licensing deals was a key pitch to investors during its IPO roadshow.
Ohanian left in 2020, noting he wanted his board seat given to a diverse candidate. Interestingly, mentions of him were left out of Reddit's prospectus.
Despite being in business for almost 20 years, Reddit has never turned a profit. Last year the company saw sales rise 21% year over year to $804 million. The net loss clocked in at $90.8 million. Its daily users tally about 73 million strong.
"I like the trend we are on," Huffman said when asked if adjusted profits achieved in late 2023 would continue in 2024. He declined to say if Reddit would be profitable in 2024.
Other facts to know:
AI kingmaker Sam Altman and Chinese tech giant Tencent are Reddit’s fourth- and second-largest shareholders, respectively.
Huffman’s total 2023 compensation stood at $193.2 million, which includes $93.7 million in options awards and $98.3 million in stock awards.
Key call-out from its SEC filing: “Our Chief Executive Officer, Steven Huffman, holds 662,447 PRSUs for shares of our Class B common stock that are issuable upon achievement of a vesting condition that will be deemed satisfied based on our attaining a $5.0 billion market capitalization valuation following this offering.”
The GameStop (GME) and AMC (AMC) meme stock trading saga was mentioned in the company’s risk factor section.
1.76 million shares were reserved for the Reddit user base to buy.
Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on Twitter/X @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations, or anything else? Email [email protected].
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