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Sarah Gilbert spends a lot of time on Reddit.Over the past three years, she has helped moderate r/askhistorian The subreddit has 2 million members and was the subject of her doctoral thesis. paper. She has been lurking on the forum since 2012.
But when talk turned to Reddit’s upcoming IPO, Gilbert’s excitement waned. The 19-year-old social media company reserves 8% of its shares in its offering for certain users and moderators, as well as some company insiders and their friends and family. Airbnb, Rivian and Dosimiti They adopted a similar model when they went public as a way to reward premium users or early customers.
Reddit’s IPO was different. While its predecessors went public during record-setting IPOs in 2020 and 2021, Reddit plans to debut on the New York Stock Exchange this week in what would be the first major tech listing of the year and after a market marked by a steep sell-off. Landed after a major industry liquidation. Valuation, reducing investment, focusing on profits over growth. Two venture-backed tech companies debut in 2023 — Instant shopping cart and Clavijo — failed to succeed, suggesting that entry at the IPO price no longer equals free money.
It’s not just market conditions that have Reddit moderators like Gilbert passing up investment opportunities. Reddit has long had a rocky relationship with moderators and the site’s most loyal users, known as Reddit users. Reddit CEO Steve Huffman sparked user protests last year after policy changes forced some third-party developers to pay more to use the company’s application programming interfaces (APIs). Comparison of The moderator of the website is a “landlord gentleman”.
Gilbert, a research manager at Cornell University’s Citizenship and Technology Laboratory, said the hatred caused by the conflict “really erodes the goodwill and energy of those who spend the most time and energy.” Try to build a community on your website. She now struggles to see the appeal of paying to own part of a company and bet on its future.
“It’s like, okay, you’ve invested your time, you’ve invested your emotional health and put yourself at risk, now invest your money into this platform,” Gilbert said explain. “I don’t feel like Reddit is necessarily going to give back, but I feel like it might be asking for more.”
Reddit founders Alexis Ohanian (left) and Steve Huffman (right)
Reddit, a website with 60,000 active daily moderators hosting forums on topics ranging from mainstream to extremely obscure, plans to sell shares in the IPO at $31 to $34 per share, potentially valuing the company at around $6.5 billion, trading under the ticker “RDDT.” At the height of the tech market in 2021, private investors valued Reddit at $10 billion, according to PitchBook.
Reddit’s Targeted Sharing Program (DSP) is open to certain U.S. users or moderators who have a high site-wide reputation (measured by so-called karma points) as a way to “recognize those who have made significant contributions to Reddit over a period of time.” “people” way.year,” the company said explain Dedication. Total, Reddit explain Underwriters have reserved 1.76 million shares of the 8 million IPO shares for DSP.
Some invitees said they were concerned about the company’s financial health. Reddit’s net loss last year was $90.8 million, an improvement from 2022, when the deficit was $158.6 million. The company said in its prospectus that its cumulative losses amounted to US$716.6 million.
Reddit is in a notoriously difficult market with companies like Google and its YouTube service, Facebookapp and TikTok. In the filing, Reddit also lists Wikipedia as a competitor, break,X, interest, Robloxdisharmony and Amazon’s twitch.
A host who goes by the handle BuckRowdy, who spoke on condition of anonymity to reveal his real name, told CNBC he would abandon the IPO and said his views appeared to be widely shared.
“People do seem to have a negative perception that it’s going to go down immediately or you’re going to lose money,” said Buckrody, who moderates Reddit subreddits such as r/UnresolvedMysteries and r/TrueCrime. “I don’t see anyone in any area that I’m in that takes it seriously as an investment or anything like that.”
Reddit had no comment for this story.
meme stocks
Of all companies, Reddit has some exposure to stock market fluctuations.
The company acknowledged this risk in its IPO filing:
“Given the broad popularity and brand recognition of Reddit, including the popularity of r/wallstreetbets among retail investors, and the direct access retail investors have to widely available trading platforms, the market price and trading of our Class A common stock Stocks may experience extreme volatility for reasons unrelated to our underlying business or macroeconomic or industry fundamentals, which may result in your loss in whole or in part if you are unable to sell your shares at or above the initial offering price. invest. “
Joshua White, an assistant professor of finance at Vanderbilt University, said Reddit’s DSP could be a “good reserve tool” if it wanted to follow the lead of companies that went public in 2020 and 2021.
“It’s usually a good deal because really hot IPO stocks tend to go up on day one,” White said.
However, given the scarcity of tech IPOs since early 2022, White said Reddit’s offering “may be riskier.”
While there’s a lot of skepticism surrounding the IPO, some Reddit users appear ready to get in on the action, based on forum Comment.
A Reddit user named FormicaDinette33 said in r/RedditIPO Reddit subsection According to one post, they plan to buy 10 shares “just to experience the process,” and SpindriftRascal plans to spend $5,000, money that will allow them to “be happy if it does well and not care too much if it doesn’t.” .
Sweatycat, a moderator of the r/IAmA and r/LifeProTips Reddit subreddits, plans to participate in the IPO, telling CNBC that they “all like Reddit as a company and think it’s a potentially good investment opportunity.” The reluctant The anonymous Reddit user said other moderators may have “mixed feelings” about Reddit going public because of their “strained relationships” with management.
For the wrestling girl who manages the AEWOofficial subreddit for more than 100,000 wrestling fans, the stock purchase plan is “a nice enough thing, but it’s not a reward of any kind” and is not intended to be a “long-term stable investment.”
Wrestlegirl, who also requested anonymity, told CNBC that owning the stock might be “a fun thing to do or a fun experience to talk about later, but I don’t think anyone is really taking Reddit’s public offering seriously.”
“It was laughed at so much”
Akaash Maharaj is not eligible for the program as a resident of Canada. He said he would have declined an invitation to attend even if he could, largely out of business concerns. He also said that moderators should not increase the company’s stock price at the expense of “the long-term image of the platform.”
“I think very few Reddit users are enthusiastic about an IPO,” Maharaj told CNBC.
For about five years, Maharaj has helped moderate r/Equestrian, a forum for 72,000 equestrian enthusiasts.He is also a member of the organization Reddit Mod Committeea select group of power users who have come together with the aim of improving the site and, in his words, “making decisions that are in everyone’s interest.”
“We have a mixed record,” Maharaj said with a laugh.
While Maharaj is skeptical of the IPO and isn’t too bullish on the stock, he said the DSP could be “very savvy” for management to invite in and thwart any efforts by the Reddit community to derail an important moment in the company’s history. Way.
“If they don’t, there’s an increased risk that more Reddit users will verbally disparage the stock when it goes public,” Maharaj said. “Look, buy some shares and you might There will be money to be made, but you can only make money if you don’t do anything to undermine the IPO itself,” he said.
Wrestlegirl said that while she’s seen a lot of negativity among the hosts, she thinks a fair number of them will be involved in the IPO.
“It was laughed at so much it almost became a meme,” she said. “I think if this turned into GameStop, a lot of people who were secretly scoffing wouldn’t want to be left out.”
Courtnie Swearingen says she won’t be one of them.
Swearingen, an attorney, has been a Reddit moderator for about 13 years and currently runs the music forum and the forum in her hometown of Chicago. During that time, she developed a distrust of the company. In 2015, hundreds of moderators locked down their Reddit subreddits in protests led by Swearingen after Reddit employee Victoria Taylor was fired.
Swearingen told CNBC that after the ordeal, Reddit flew her and other moderators to San Francisco to collect feedback and clear up any misunderstandings. But she didn’t see much improvement and wasn’t looking forward to it anymore.
“Every time you make any promise, or come up with a new idea, it’s never done well and it’s never smooth,” Swearingen said. “Even if there was an opportunity to take a stake, I wouldn’t. I couldn’t be in a company where I Take a chance on a company you haven’t been able to trust for a decade.”
—CNBC’s Cameron Costa contributed to this report
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