Reddit IPO Excludes Australian Moderators, Raises Questions of Fairness

Quincy Jon, Tech Times 10 March 2024, 06:03 pm

Australian Reddit moderators will not have access to discounted shares in the impending initial public offering (IPO) of the widely used social platform, Reddit. The company has opted to limit the distribution of reward shares exclusively to volunteers based in the United States who contribute to the upkeep of its diverse online communities.

Scheduled to set the share price on March 20, Reddit plans to go public the following day, aiming for a valuation of up to USD 6.5 billion (AUD 9.8 billion). According to a Financial Review article, this valuation marks a considerable decline from the USD 10 billion valuation noted during a capital raise in 2010, presenting a substantial test for stock markets that have experienced limited fresh equity activity for over a year.

Australian Reddit Moderators are Skeptic

Despite its loss-making status, Reddit generates revenue through advertising, premium subscriptions, and the sale of data for training artificial intelligence (AI) models.

In the lead-up to the IPO, Reddit extended a share offer to users, colloquially known as Redditors, who moderate discussion forums or have achieved notable status within the community. An invitation shared online by a user highlighted the chance for these contributors to become Reddit owners at the same price as institutional investors. However, the offering excludes popular Australian forums due to apparent legal reasons.

In this photo illustration, the Reddit logo is displayed on a cell phone and computer monitor on February 13, 2024 in Los Angeles, California. (Photo : Mario Tama/Getty Images)

A moderator from the Married at First Sight forum, dedicated to the reality show broadcast by Nine, expressed dissatisfaction, stating, "Yeah, nah, not missing out," while choosing to remain anonymous.

Redditors responded skeptically to the share offering, with some expressing doubts about the promotion's widespread nature and interpreting it as a sign of desperation. In 2023, Reddit reported a loss of USD 90.8 million and a 21% revenue increase to USD 804 million.

Reddit IPO's Big Winner: Sam Altman

TechTimes recently reported that OpenAI CEO Sam Altman is seen to benefit greatly from Reddit's IPO. Altman led a $50 million Series B financing round for the platform in 2014. He benefits from Reddit's public listing by investing. Altman also invests in Asana and Instacart. As Y Combinator's previous president and OpenAI's co-founder, he has important insights regarding startups.

Sam Altman's 2021 investments show his faith in Reddit's development. The platform raised $512 million when he invested $50 million in Series E capital, increasing its value by 45%. Altman prioritized strategic investment performance on Reddit's board until 2021.

Online social media platform Reddit filed for an IPO last month, explaining how it operates. For 18 years, Reddit, the "front page of the internet," has included user-generated "subreddits" on numerous topics. Over 100,000 communities and 73 million daily active users were on the site in December 2023, up from 52 million in 2021, per CNN.

Reddit aims to diversify revenue streams beyond traditional advertising by planning to sell data to AI firms and emphasizing the "user economy." Future initiatives include expanding e-commerce, introducing the Reddit Contributor Program and the Reddit Collectible Avatar Creators Program, which enables users to earn rewards, aligning with the company's focus on sustained growth. However, Reddit acknowledges a history of net losses, expressing uncertainty about achieving future profitability.