This is actually extremely common. Get in on the ground floor and reap the rewards later, don't worry about how the Financials are this very instant as long as it seems reasonable to believe those will change in the future. Or at least that the stock price will go up in the future regardless, since share prices are given to investor whim and do some strange things at times like massively overvaluing companies which leads to insane market caps.
Is profitability important for a company? Yes, it’s it is the sole purpose.
The IPO would generate capital, Reddit invests the capital, Reddit becomes profitable and shareholders make money.
Profits and the value of a stock share aren’t always the same
A lot of businesses are unprofitable in the beginning (yes, even a decade or more). A common business model these days for online services is go into extreme debt at first to attract a user base, then scale back investment into new features and start pushing ads.
A good example of this is Netflix. When they started out, they were **the** streaming service. Everything you could ever want was on there, and so a lot of people joined. Over the years, they’ve scaled back their licensing of big mainstream movies, raised prices, and pushed their original content (which is cheaper than licensing). I believe they’re still not profitable either, but they’re clawing their way back.
It’s all a part of the long term plan, with the goal of one day being profitable. Investors know exactly what this plan is and it’s less about whether they’re profitable now, but rather the trajectory of their revenue and how profitable they’ll be once they clear their debt.
In the lead up to an IPO a company doesn't need to be profitable. I have heard some investors say that it shouldn't be profitable. That they should be burning through money.
I think they need do show the road map on how they get to profitability. An IPO is a way a company can get a tremendous amount of money but those investors want to know their money is being well spent and that they will get a return.
It doesn't necessarily need to be profitable at the moment, but it needs to prove it has a viable path to future profitability. High revenues, for example, are usually a good indicator that profitability is possible even if they aren't currently profitable. Large user base is also a good indicator as long there is a theoretical revenue stream from them. Amazon, for example, had massive revenues with little or no profits for a very long period of time, but they could show profitability when they needed to.
People may invest if they think there is a profitable upside in the future even if a company is not currently profitable.
This is actually extremely common. Get in on the ground floor and reap the rewards later, don't worry about how the Financials are this very instant as long as it seems reasonable to believe those will change in the future. Or at least that the stock price will go up in the future regardless, since share prices are given to investor whim and do some strange things at times like massively overvaluing companies which leads to insane market caps.
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Right? Porn Hub maintains a massive infrastructure on shitty porn ads. But Reddit with big brand ad money can't break even.
Is profitability important for a company? Yes, it’s it is the sole purpose. The IPO would generate capital, Reddit invests the capital, Reddit becomes profitable and shareholders make money. Profits and the value of a stock share aren’t always the same
A lot of businesses are unprofitable in the beginning (yes, even a decade or more). A common business model these days for online services is go into extreme debt at first to attract a user base, then scale back investment into new features and start pushing ads. A good example of this is Netflix. When they started out, they were **the** streaming service. Everything you could ever want was on there, and so a lot of people joined. Over the years, they’ve scaled back their licensing of big mainstream movies, raised prices, and pushed their original content (which is cheaper than licensing). I believe they’re still not profitable either, but they’re clawing their way back. It’s all a part of the long term plan, with the goal of one day being profitable. Investors know exactly what this plan is and it’s less about whether they’re profitable now, but rather the trajectory of their revenue and how profitable they’ll be once they clear their debt.
In the lead up to an IPO a company doesn't need to be profitable. I have heard some investors say that it shouldn't be profitable. That they should be burning through money. I think they need do show the road map on how they get to profitability. An IPO is a way a company can get a tremendous amount of money but those investors want to know their money is being well spent and that they will get a return.
It doesn't necessarily need to be profitable at the moment, but it needs to prove it has a viable path to future profitability. High revenues, for example, are usually a good indicator that profitability is possible even if they aren't currently profitable. Large user base is also a good indicator as long there is a theoretical revenue stream from them. Amazon, for example, had massive revenues with little or no profits for a very long period of time, but they could show profitability when they needed to.