Reddit Under FTC Investigation Ahead of IPO

Reddit, the popular online social forum, is facing scrutiny from the US Federal Trade Commission (FTC) as it gears up for its initial public offering (IPO).

In a recent filing to the US Securities and Exchange Commission (SEC), Reddit disclosed that the FTC is conducting a non-public inquiry into its practices related to the sale, licensing, or sharing of user-generated content with third parties for training AI models. While Reddit stated it was not surprised by the inquiry, it maintains that it has not engaged in any unfair or deceptive trade practices.

The investigation comes at a crucial time for Reddit as it prepares to go public. With the vast majority of its revenue historically derived from advertising, Reddit aims to diversify its revenue streams by exploring other avenues, including data monetization.

Interestingly, one of Reddit’s prominent investors is Sam Altman, co-founder and CEO of OpenAI. Speculation suggests that Reddit may consider selling its data to OpenAI to support the training of its ChatGPT models.

Reports suggest that Reddit is eyeing a price range of $31 to $34 per share for its IPO, potentially valuing the company at up to $6.5 billion. In an unconventional move, Reddit is extending invitations to its top moderators and users with high karma scores to purchase shares in the company.

According to its IPO filings, Reddit boasts 267.5 million active weekly users and 73 million daily users. Despite generating $804 million in revenue in 2023, the company reported a net loss of $90.8 million for the same period.

As Reddit navigates regulatory scrutiny and prepares for its public debut, the outcome of the FTC investigation could have significant implications for the company’s future growth and valuation in the public market.