Reddit said Friday that the Federal Trade Commission has launched an investigation into the social media platform’s practices of selling, licensing or sharing its users’ posts and other content with outside organizations for use in training artificial intelligence models.
The company disclosed the investigation in a filing with the Securities and Exchange Commission on Friday, citing a letter from the Federal Trade Commission on Thursday.
“Given the novelty of these technologies and commercial arrangements, we are not surprised that the FTC has expressed interest in this area,” Reddit wrote in the filing. “We do not believe that we engage in any unfair or deceptive trade practices. Behavior.”
Like many other social media platforms, Reddit has expressed interest in commercial deals in which artificial intelligence companies pay for access to databases of human-written text, which AI models can use to improve conversations, answer questions, and generate written works and images on request. ability.
Reddit released a written statement about the deal about a month ago.
Friday’s disclosure comes as Reddit prepares to sell stock to the public for the first time. The San Francisco-based company filed documents on Monday in anticipation of an initial public offering that would value the 18-year-old platform at as much as $6.4 billion.
Reddit expects sales to grow more than 20% in 2024 as IPO approaches
Bloomberg Business
Reddit Inc. told potential investors in its initial public offering that it expects revenue to grow more than 20% in 2024 from the previous year, according to a person familiar with the matter.
The social media company gave guidance during a roadshow event, saying its revenue trajectory would be similar to last year, the person said. Revenue will grow to $804 million in 2023, according to its SEC filings. That’s 20.5% higher than last year’s figure, according to data compiled by Bloomberg.
Reddit expects to break even on adjusted EBITDA this year, this person said. The company reported an adjusted Ebitda loss of $69.3 million in 2023, the filing showed.
Separately, some underwriters of the offering estimate Reddit’s revenue will grow at a rate similar to the company’s own forecasts, said another person, who asked not to be identified because the information is private.
A representative for Reddit declined to comment.
The figures were discussed as part of marketing to potential investors in the IPO, which could raise up to $748 million for the company and a group of employee investors, the filing shows. In total, they sold 22 million shares at prices ranging from $31 to $34, filings show.
The forecasts would mark Reddit’s continued turnaround, which saw it turn a profit in the fourth quarter of last year, according to Bloomberg. The company has gone beyond its traditional revenue source, advertising, to allow third parties including Alphabet Inc.’s Google to pay to license access to data on its platform. Reddit expects revenue from these agreements to be at least $66.4 million this year, the filing shows.
Investment banking analysts who underwrite a company’s products have models of growth and profitability over the next few years, based on their own assumptions and research. Although underwriters are limited in the amount of time they have to release research reports (usually around 25 days), these numbers often influence how investors view a company’s valuation for its offering.
Documents show that the IPO was led by Morgan Stanley, Goldman Sachs Group, JPMorgan Chase and Bank of America. According to Bloomberg, Reddit plans to price the offering on March 20 and start trading the next day. The company plans to trade its shares on the New York Stock Exchange under the symbol RDDT.
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