The reclusive family set for a $2.1 billion Reddit windfall

The American billionaires behind the Condé Nast media empire will reap a $US1.4 billion ($2.1 billion) windfall from Reddit’s Wall Street listing, 18 years after paying just $US10 million for the social media company.

Advance Publications, owned by the publicity shy Newhouse family, one of America’s richest dynasties, has a 30.1 per cent stake in Reddit – which is targeting a valuation of up to $US6.4 billion when it goes public next week.

The next generation: Steven Newhouse, son of Donald, with wife Gina Sanders.Credit: Getty

On Monday, Reddit set an initial price range of between $US31 and $US34 a share, which would value Advance’s stake at between $US1.3 billion and $US1.4 billion.

Condé Nast, the Advance-owned publishing empire behind Vogue, Vanity Fair and The New Yorker, acquired Reddit for $US10 million in 2006, a year after it was founded.

Advance was launched in 1922 by the publishing magnate Sam Newhouse, who later handed control of the business to his heirs Donald and Samuel Jr before his death in 1979.

Samuel Jr, who died in 2017, was credited with developing the family’s iconic titles, while 94-year-old Donald remains president of Advance.

Donald and Samuel Jr built up a Succession-worthy collection of newspaper, magazine and telecommunications assets that remain owned by the family, which continues to keep a low profile.

Control has gradually been handed over to the brothers’ sons, Steven, Michael and Samuel III, as well as younger cousin, Jonathan. The family is listed as America’s 13th-richest with a combined wealth of $US24.1 billion, according to Forbes.

As well as Reddit and Condé Nast, the group owns the Ironman long-distance race group and is the largest shareholder in Warner Bros Discover and telecoms giant Charter.

Until 1998, the group owned the Random House book publisher.

Samuel Jr, known as Si, commissioned Donald Trump’s The Art Of The Deal in the 1980s.

Donald Newhouse (pictured) and brother Samuel Newhouse Jr built up a Succession-worthy collection of newspaper, magazine and telecommunications assets that remain owned by the family, which continues to keep a low profile.Credit: Getty Images

Advance spun out Reddit as a separate company in 2011 but it is still poised to make a huge profit on its investment.

Reddit began an investor roadshow on Monday and is likely to adjust its expected share price as it responds to investors’ feedback.

The flotation will be one of the biggest of the year so far and is being closely watched as a test of investors’ appetite for new listings.

Other major investors include Chinese internet giant Tencent, which owns an 11 per cent stake, and Sam Altman, the chief executive of ChatGPT’s developer, OpenAI.

Altman, who led a 2014 funding round, owns 8.7 per cent of Reddit. This is worth up to $US413 million based on Monday’s pricing range.

Reddit could raise as much as $US748 million in the New York Stock Exchange listing, making it the biggest social media flotation since Pinterest’s stock exchange debut in 2019.

Until 1998, the group owned the Random House book publisher. Samuel Jr, known as Si, commissioned Donald Trump’s The Art Of The Deal in the 1980s.Credit: AP

However, even at the optimistic end of its valuation range, it will be worth far less than the $US10 billion at which the company raised funds in 2021, the peak of a tech investment boom.

Reddit has around 73 million daily users who join communities known as “subreddits”, dedicated to their favourite sports teams, local city or hobbies.

It is famous for features such as “ask me anything” events where celebrities respond to users’ questions, and its system of upvotes and downvotes, which determine what comments appear at the top of discussions.

In 2021, its Wall Street Bets community was the centre of the “meme stock” trading craze that sent the share prices of companies such as GameStop soaring and led to claims of an investing revolution.

The number of users has grown by 27 per cent over the last year, while revenue climbed by 21 per cent to $US804 million, almost all of it from advertising.

Reddit has also recently been boosted by changes to Google’s search algorithm that have prioritised authentic material over spam web pages.

OpenAI chief executive Sam Altman is another set to cash in on Reddit.Credit: Eamon Gallagher

However, the company faces a string of questions and concerns that may deter prospective investors. Eighteen years into its existence, the company has never turned an annual profit and lost $US90.8m last year.

This is despite the company outsourcing a significant amount of work to volunteer “moderators”, who police various subreddits and determine their rules.

Reddit is also known for its often unruly and opinionated user base, which has repeatedly landed the company in trouble.

Its management tied itself in knots for years over a subreddit devoted to Donald Trump that became a hotbed of conspiracy theories.

In its early days, Reddit was also notorious for containing non-consensual explicit images and harbouring racist communities.

The flotation will be one of the biggest of the year so far and is being closely watched as a test of investors’ appetite for new listings.

The company has since purged its worst elements but can still find itself hostage to users’ whims.

Last year, thousands of subreddits became inaccessible to the public in a revolt against plans to start charging for access to large amounts of Reddit data.

The artificial intelligence revolution has created a new opportunity.

It has struck a $US60 million a year deal with Google, under which the search giant will use Reddit’s valuable data to train its AI systems.

But to be a success, it will have to overcome the scepticism of its users.

Comments about Reddit’s stock market listing on the Wall Street Bets subreddit have been overwhelmingly negative, flooded with posts seeking advice on how to bet against the company.

The Telegraph, London

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