Sam Altman, Former Major Reddit Shareholder... Will He Use IPO as a Successful Investment Case?

Sam Altman, CEO of OpenAI and known as the 'father of ChatGPT,' has been confirmed as a major shareholder of the online community Reddit, which is set to go public (IPO) next month. Having once served as interim CEO, all eyes are on whether he can achieve another successful investment case through Reddit's successful IPO.

[Image source=AP Yonhap News]

According to U.S. media outlets including Bloomberg on the 22nd (local time), citing Reddit's S-1 filing submitted to the U.S. Securities and Exchange Commission (SEC) for the IPO, Altman holds 8.7% of Reddit's issued shares (789,467 Class A shares and 11.4 million Class B shares). Although Altman's investment in Reddit had been known for some time, this is the first time the extent of his stake has been disclosed. Altman's stake exceeds that of Reddit's co-founder and CEO Steve Huffman (3.75%). The largest shareholder of Reddit is Advance Magazine Publishers, holding about one-third of the total shares. Chinese company Tencent holds 11%.

Major foreign media highlighted Altman's stake and noted that his connection with Reddit dates back to the past. Reddit co-founders Huffman and Alexis Ohanian participated in Y Combinator, a startup incubator led by Altman in 2005. Y Combinator was an early investor in Reddit. In 2014, Altman served as Reddit's interim CEO for eight days. The filing submitted by Reddit also included that Altman was a member of Reddit's board until 2021.

[Image source=Getty Images Yonhap News]

CNBC reported that Altman led Reddit's $50 million Series B funding round in 2014 and wrote a blog post stating, "This community has been very important to me over the past few years. It’s a place where you can find like-minded people, even if you can’t always find them in the real world."

Accordingly, if Reddit's IPO succeeds next month, Altman is expected to add another successful investment case. Reddit is pursuing the IPO under the codename ‘RDDT.’ Specific offering prices and terms have not yet been disclosed. CNBC reported that Altman could profit from Reddit's listing.

However, investors' views on Reddit's IPO success are divided. Major foreign media have valued Reddit at a minimum of $5 billion (approximately 6.6 trillion KRW). This is far below the valuation of over $10 billion during private funding in 2021. Concerns have been raised among investors that Reddit's IPO might follow the path of the grocery delivery platform Instacart. Instacart was valued at $39 billion in 2021 but was valued at only $9.9 billion at its IPO last September.

Founded in 2005, Reddit is a social media platform with 73 million daily users. After the pandemic, a 'meme stock' investment craze in Reddit's stock discussion forums helped it become a leading online platform in the U.S. Last year's revenue was $804 million, a 20% increase from the previous year. Although the net loss last year was $90.8 million, reduced from $158.6 million the year before, Reddit has continued to operate at a loss since its founding. Reddit plans to increase profitability through a business model that sells subscriber data to artificial intelligence (AI) companies, but this is expected to inevitably raise privacy-related controversies.

Meanwhile, Reddit announced on the same day that it has signed an AI content licensing agreement with Google. Accordingly, Google will apply Reddit's content for AI model training and other uses.