reader comments 50 Thousands of the most dedicated Reddit users will have a chance to snag shares when the company goes public in 2024, The Wall Street Journal reported Wednesday.
Citing people familiar with the matter, The Journal reported that 75,000 of the "most prolific" Redditors will have an opportunity to buy "an as-yet-undetermined number of shares" before trading starts.
This privilege, WSJ noted, is "normally" reserved for "big investors" who can stand to hugely profit if the share prices dramatically rise after Reddit begins listing shares on the New York Stock Exchange (NYSE), which is expected to happen this March.
Of course, Redditors could also experience the opposite and lose on their investment if the stock immediately plummets. That could further rile Redditors currently protesting changes at the company or spur Redditors to dump the stock before they can reap any benefits from buying into Reddit stock early on.
Individual investors appearing to be more prone to "selling at the first sign of weakness" is one reason banks typically prefer to sell to "big money managers," the WSJ noted.
Many longtime Redditors who may be intrigued by this offer might be wondering what the odds are of Reddit's initial public offering (IPO) faring better than the majority of new listings that The Journal reported are struggling to find buyers, remaining below listing prices. It's still too early to say, but Reddit made some moves before announcing the IPO that could inspire some confidence.
AdvertisementReddit announced its IPO in December 2021, nine months after Drew Vollero joined as the company's chief financial officer. In a blog post, Reddit noted that Vollero had previously steered Snap through its IPO as a public company, which CNBC reported quenched a "long drought in the market for tech IPOs" after closing its first day of trading with share prices up 44 percent. While TechCrunch reported that Snap became a "laughing stock" of the NYSE within two years—"sinking to an all-time low" in December 2018—the company eventually bounced back after finding new ways to attract users.
Although Snap stock recently began plummeting again through earnings losses and layoffs, by the time Vollero left Snap, the company was on track to hit an all-time high for share price in September 2021, Fast Company reported.
Vollero's track record likely appealed to Reddit as the company weighed going public in 2021. The company also seemed encouraged by positive trends on its platform, confirming that its decision to go public came after the WallStreetBets forum brought in millions of new users and advertisers, the WSJ reported.
Reddit declined Ars' request to comment but has long made it clear that it hopes to entice users to become shareholders. From the beginning, Reddit's blog said, the plan was to "make Reddit’s share offering more accessible to individual investors," hinting in 2021 that users could one day own a piece of Reddit. And at a tech conference that year, Reddit CEO Steve Huffman directly said that the company wanted to make it easy for users to become shareholders.
“I want our users to be shareholders, and I want our shareholders to be users,” Huffman reportedly said.
By inviting users to become shareholders, Reddit saw an opportunity to help drive change, Huffman said, at a time when "the market is evolving to be more fair" and accessible to individual traders buying and selling stock through platforms like Robinhood.
Outlook murky for Reddit’s first day of trading
Some loyal Redditors may not trust the company enough to buy into it, though. Recently, Redditors have been critical of the company, launching widespread protests last June after Reddit killed off many third-party apps by charging for access to its application programming interface.
Community trust quickly became a casualty of Reddit's ensuing war with its users, who fought to defend their favorite apps while Reddit rushed to reassure staff that the protests weren't hurting its revenue. To smooth things over, Reddit made seemingly half-hearted efforts to make amends with protesting Redditors in July before calling for "a few new mods" to replace the community moderators the company had either axed or alienated.
By February of this year, discord seemingly remained. Some developers no longer believed that Reddit cared about users in the third-party app environment, questioning the company's leadership that had decided to require most popular third-party apps to drastically change their business models just to survive on the platform.
When Reddit announced its plans to go public, the company was valued at about $10 billion, Reuters reported, but "valuations have swung since then," the WSJ reported. Reddit is not considered profitable, Forbes reported last June, but some of Reddit's third-party apps were—a tension that remains hard to reconcile between the company and many users. At the same time, Reddit's IPO becoming a success appears to depend somewhat on Reddit remaining "very popular," an industry analyst told Forbes, and any future unpopular moves the company might have planned that could be as impactful as changing its API access may risk user boycotts becoming "terminal." If left unresolved, even Redditors not boycotting the platform and considering buying into the company may be dissuaded by this tension.
AdvertisementAfter years of delaying its IPO in pursuit of profitability ahead of its debut, Reddit's first day of trading, expected as soon as March, may not be as splashy as Snap's debut. A Forbes analyst, Peter Cohan, urged savvy investors to "not buy into an IPO on the first day of trading."
"I would not buy Reddit stock on the day of the IPO since the price will be engineered by underwriters to rise significantly on the first day of trading," Cohan wrote. "Instead, you should wait until after Reddit reports its first quarterly earnings as a public company."
However, a Nasdaq post from financial analyst Surbhi Jain suggested that if Reddit's IPO is a hit, it "could mark a turning point in the tech offering market, following a drought since Pinterest Inc’s debut in 2019," possibly "kickstarting the market" for IPOs the way Snap's debut did.
While Reddit has long hoped its users would share its enthusiasm in going public, Cohan's piece also quoted Redditors griping about the IPO.
"Reddit is in the worst shape it’s ever been in and I’ve been on this goddamn website for like 17 years," a user called huxtiblejones posted. "I have legitimately never felt so tired of it, so let down by it, so certain that the quality of virtually every community has diminished… and yet it’s making more money than ever? Yikes."
Another user, fr0z3nph03n1x, joked that “Reddit killing the platform to [eke] out a nightmare IPO is gonna be hilarious.”
Advance Publications, which owns Ars Technica parent Condé Nast, is the largest shareholder of Reddit.
