Reddit is Coasting Off 2021's Crypto Hype to an IPO

Reddit has come a long way from the platform where customers just shared conspiracy theories. After becoming hugely popular in 2021, the company wants to go public.

Reddit is Coasting Off 2021's Crypto Hype to an IPO

Kicking off the year, Reddit is moving forward with plans for an initial public offering (IPO), and crypto believers are watching.

Taking Memes Stocks to Wall Street

The Reddit IPO news was confirmed in mid-December. The company announced it had filed a confidential S-1 form with the United States Securities and Exchange Commission (SEC) - essentially, a declaration of its intent to offer stocks to the public.

With the SEC filing, Reddit confirmed months of rumors surrounding a public offering. Now, the company is entering a quiet period, unable to share details on share price or other financials. The company claims it will list on a stock exchange once the SEC reviews its offering and gives the green light.

Reddit's growth has been astronomical in the past couple of years. In the past, the company lived in the shadows of larger firms like Google and Meta. Social media giants like Meta's Facebook and Twitter have dominated public conversation and human interaction for over a decade. Snapchat and Instagram became massive hits with video-sharing content.

Reddit became more of a fringe app, home for people who wanted the freedom to discuss topics without the restrictions of platforms like Twitter and Facebook.

Understanding the Reddit Boom

Everything changed when crypto went mainstream. Over the years, Reddit built a budding crypto community. Crypto holders formed forums and groups on the platform.

In 2021, Reddit supported WallStreetBets - a group of individual traders who successfully executed a short squeeze on a hedge fund over GameStop. The GameStop saga cemented Reddit's status as a force to be reckoned with. Over the next couple of months, crypto-focused Reddit groups banded together to pump the prices of several assets.

Reddit is so supportive of cryptocurrencies that the platform's r/CryptoCurrency subreddit, currently boasting over 3 million members, launched its own coin - r/CryptoCurrency Moons (MOON).

With more users heading over to Reddit, the company is raising funds. Reddit raised $250 million in its Series E funding round back in February 2021, hot on the heels of the GameStop saga. In August, the company raised a staggering $700 million in its Series F funding round, led by Fidelity Management and Research Company LLC. The funding round gave Reddit a valuation of $10 billion.

The Case For - and Against - Reddit

It's still unclear how much Reddit plans to raise with its IPO. But the company's numbers are growing.

As of August, Reddit held over 100,000 active subreddits and 52 million daily active users - contributing to over 50 billion daily page views. The company claimed in an update that it had earned $100 million in ad revenues for the second quarter of last year - a jump of almost 200 percent over the second quarter of 2020.

A recent survey revealed that 18 percent of Americans use Reddit - up from just 11 percent in 2019. Over 25 percent of Americans who make over $75,000 annually say they use Reddit. The platform is hugely popular among users willing to pay if it changes its business model.

But it's not all roses for Reddit. The company is still a small player compared to related platforms. Its 50 million daily active users is just a quarter of Twitter's. Facebook's daily active users are in the billions.

Amazon, Facebook, and Google have gobbled up the entire digital marketing landscape. It isn't easy to see Reddit breaking in. Even platforms like Snapchat and Twitter, which get much more than Reddit in terms of ad revenues, are seeing stocks struggle.

Regardless, the same wave that made Reddit famous might just help the company. Retail investors could take a shine to the company's stock, and as the GameStop saga has shown, this could be enough to sustain it.

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