The Real Reason for Reddit’s IPO Plan Should Come As No Surprise

There are all kinds of reasons that fast-growth companies want to go public. For  Reddit, at the top of list is the chance to give back to its loyal employees.  

On December 15 the online message board company announced it had confidentially filed an S-1 form with the Securities and Exchange Commission for review, with intent to go public through an initial offering of stock. A blog post announcing the IPO gave little detail about the San Francisco-based business’s plans, citing regulatory reasons.

Known as the internet’s town hall, Reddit is reliably one of the 10 most-visited websites in the United States, averaging 52 million daily active users in October 2021. The company, founded in 2005 by University of Virginia graduates Alexis Ohanian and Steve Huffman–the latter of whom now serves as chief executive–was acquired in its early days by the parent business of the Conde Nast media empire. It later regained autonomy and has raised multiple massive funding rounds in recent years, operating more like a typical fast-growing startup.

One of the site’s founding tenets was “freedom from the press.” Reddit placed a high value on open dialogue, which led the company into countless scandals, including a user revolt, interim CEO Ellen Pao essentially being harassed out of her position, a Russian hacking attempt, and, more recently, involvement in the GameStop-Robinhood meme-stock saga.

Huffman left the company for a period, but returned as CEO in 2015, and set on a path to regain corporate stability and make Reddit welcoming to new users and new content types.

In the course of reporting on my book, We Are the Nerds: The Birth and Tumultuous Life of Reddit, the Internet’s Culture Laboratory, Huffman told me an IPO was likely in Reddit’s future. This was 2017, and at the time he was hesitant to say those three letters publicly for fear of setting off a wave of headlines. But he hinted that he’d always imagined the company would go public, simply due to the structure of its employee packages and investments. He said:

There’s an implicit promise we make when we pay people in stock options, that sometime these options will be worth something. One of the things on my mind is at some point I would like to pay our employees back and our investors back for believing in us. For taking the risk with us.

To be sure, Reddit’s rank-and-file employees aren’t the only ones in line for a windfall when the company’s shares begin trading. Huffman’s own salary for years was (and may still be) tied to performance, and his compensation is likely stock-heavy.

More recently, in March, Huffman told The New York Times: “We’re thinking about it. We’re working toward that moment.” He didn’t attach a timeline to those thoughts, and in August they appeared to have been set aside when Reddit unexpectedly brought in a whopping $700 million in investor funding, which valued it at more than $10 billion.

But some of that funding would be, it turns out, used to explore a public stock offering. Reddit in November hired former WWE vice president Michael Guido as head of investor relations. “Working toward that moment,” indeed. A public offering will be validation of Huffman’s work scaling Reddit the company, and the site–if investors believe its scandals and its rebellious leanings are indeed a thing of the past.

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