Maverick social networks still toying with IPOs
A change of ownership can lead to a massive boost in revenue but also renewed scrutiny and, when it comes to media, accusations of a more conservative approach to content. Social media in particular has a history of investors getting it wrong, routinely overpaying for services then failing to tap what made their communities special. For example, after Ruper Murdoch’s News Corporation spent $580 million in 2005 on MySpace only to offload it for $35 million in 2011. Similarly, Bebo was sold by husband and wife co-founders Michael and Xochi Birch to AOL for $850 million in 2008 then bought back by the couple for $1 million five years later. But these are different times and an investment in social media is a much less volatile prospect than it once was, or is it?
A new generation of social media names with strong communities is raring to go public but each of them come with a health warning. Concerns over profitability, freedom of speech and new EU regulations putting an onus on platforms to protect their users threaten to impact the value of platforms that have gained a following by subverting the status quo. Two in particular, Reddit and Telegram, are being watched closely.
On Wallstreetbets, the infamous financial community on Reddit, the impending IPO of Reddit itself is being busily discussed. Another contrarian social network, Telegram, is also brooding on IPO plans.
Reddit should become the first US social media platform to go public since Pinterest in 2019.
After about three years of speculation and preparation, it’s finally here. Reddit is taking a small chunk of its capital to the stock market soon, hoping to raise $748 million, according to documents filed with stock market watchdog SEC.
Reddit is aiming for a share price between $31 and $34, which would value the entire company at about $6.4 billion. That’s a far cry from the valuations – $10 billion and even $15 billion – previously pasted on the company.
The stock will be listed on the New York Stock Exchange under the ticker RDDT. Users of Reddit will be able to subscribe, provided they are of age. So success will depend in part on the involvement and support of the user community. Among Reddit’s current shareholders, some of whom will be able to cash in on their stake, is Sam Altman, who is causing a furor with OpenAI.
Reddit is still loss-making, with a net loss of nearly $91 million last year. The company, founded in 2005, has never made a profit.
As a reminder, the somewhat rebellious platform Reddit, which revolves around niche discussion groups, made headlines around the world when in 2021 the Wallstreetbets subgroup made its mark on the prices of certain ‘meme stocks,’ – shares in struggling companies bouyed up by social media-generated hype – notably AMC and GameStop. Hollywood made a movie about it aptly named Dumb Money.
The good or bad reception of Reddit by investors could have significant implications for future technology IPOs and the ad market. After all, it’s not just Reddit that beckons to the stock market.
Encrypted mesaging app Telegram has steeped into the space created by Blackberry Messenger and WhatsApp. The service allows users to share mesages within secured communities, making it popular in political and media circles. It also does not require a phone number to register, enhancing its credentials as a safe space.
Telegram’s discreet founder Pavel Doerov, in a rare interview, tells the Financial Times, that the social media company is nearing profitability.
The platform is quietly outgrowing its initial niche status. According to Doerov, Telegram now has 900 million monthly active users, up from 500 million at the beginning of 2021.
“We see an IPO as a means to democratise access to Telegram’s value,” Doerov said of a possible IPO, who also revealed that private investors such as large tech funds value Telegram at more than $30 billion.
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