By Karen E. Roman
In an interview with Schwab Network's Nicole Petallides, IPO Edge Editor-in-Chief John Jannarone discussed that Reddit will conduct its largest IPO to date in 2024 and will demonstrate impressive performance metrics including gross margins of nearly 90%, revenue of over $800 million in 2023, and annual growth of more than 20%.
At a valuation of around $6.4 billion, Reddit would command a multiple of eight times trailing revenue. Mr. Jannarone compared Reddit's valuation to prices two years ago, when companies were privately raising money at much higher levels (Reddit had a $10 billion round).
Looking at how the market will receive the deal, he pointed out that the company has been around for over 18 years and has a community of 73 million daily users. He also mentioned that Reddit was profitable on an Ebitda basis in the fourth quarter of 2023 and expects a long-term Ebitda margin of 40%.
Mr. Jannarone noted that Reddit has had fewer problems with advertisers than companies like Meta Platforms, Inc. (Nasdaq: META) or X (formerly Twitter) and that this should be a good foundation for the business. Additionally, Reddit has great revenue potential by leveraging data to power machine learning (ML) and AI models that need to be trained. Reddit focuses on text interactions and does not rely on videos, making it cheaper to run and making it easier for ML and AI programs to process the data it collects.
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The full Schwab interview with Ms. Petallides and Mr. Jannarone can be found below or here IPO Edge.com.
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