Reddit's strategy for AI is a significant reason for its share pricing, with the company selling $203 million worth of contracts to AI companies for data access earlier this year. The company expects to recognize a minimum of $66.4 million of revenue from these contracts by the end of 2024. Reddit's data, which is continuously growing and regenerating, is a valuable resource for AI companies, and the company has already demonstrated its ability to generate revenue from this resource.
Key takeaways:
- Reddit's IPO plans are becoming clearer with a new S-1 filing that sets an initial price range for its stock at $31 to $34 per share, potentially valuing the company at around $5.4 billion.
- Despite being unprofitable, Reddit is on track to trade for a multiple of 6.9x to 8.0x its revenue, which could increase if investors agree to go higher than the $34-per-share range.
- Reddit's strategy for AI is one reason why it's pricing its shares closer to Meta than Snap, having sold $203 million worth of contracts to AI companies for access to its data earlier this year.
- Reddit's constantly growing and regenerating data could serve as a key element in the training of large language models and serve as an additional monetization channel for the company.