When Reddit Inc. lists on the New York Stock Exchange this week, its fate will rest, in part, in familiar hands: those of its users.
The company has reserved about 8% of its long-awaited public offering for its most prolific users, including volunteer moderators who help tame the platform. Their shares won’t be subject to a lockup, meaning the owners can sell them on the opening day of trading. Some of those users have already threatened to bet against the company.
We’ve all seen what subreddits can do for companies, both positive and negative, said Kyle Stanford, lead venture capital analyst at PitchBook. Reddit has been built on its users, so at the very least, this is a goodwill building effort.
The social media platform is set to price one of the year’s most closely watched US IPOs Wednesday, with the company and some existing shareholders seeking to raise as much as $748 million, according to company filings. It plans to begin trading on the NYSE Thursday under the symbol RDDT. Redditors, as users are known, have a historically combative relationship with the site, launching revolts over everything from racism on the platform to executives’ staffing decisions.
Bryant Zadegan, who runs the r/relationship_advice forum, which has about 11.5 million subscribers, was offered a chance to purchase up to 1,000 shares in the offering. He immediately decided to buy in, saying Reddit’s plans to license data to artificial intelligence companies to train large language models is what makes him a believer in the stock’s longterm value.
At least with how generative AI is trained today, the training still requires human content, he said. Reddit and other platforms like it will be necessary for AI to continue to be refined.
Zadegan, who describes himself as an internet janitor for Reddit, said he hopes the company will eventually figure out a way to share revenue from AI licensing deals with the users who generate content. He plans to hold onto his stock, even if it pops on listing day.
Reddit will want to avoid the kind of whipsaw suffered by Robinhood Markets Inc. and Instacart, which both sold shares to the very retail traders who pumped the stocks of GameStop Corp. during 2021’s meme mania. Robinhood shares soared as much as 124% in the days after its debut before spiraling 69% from the offer price six months later. Instacart, which does business as Maplebear Inc., popped as much as 43% on its debut before dropping below its offer price just a week later.
Thousands of members of the WallStreetBets forum — which boasts around 15 million users and helped send the share prices of companies like GameStop to eye-popping heights during the pandemic — voted to boost a forum post about shorting Reddit’s stock when it begins trading. Their reasons varied from the company’s lack of profitability to competitive concerns.
Jordan Zazzara, a WallStreetBets moderator who lives on the East Coast, isn’t planning to buy shares as part of the IPO program. Zazzara instead will wait to see if shares get cheaper, and then will decide whether to snap them up. Not because I’m not generally optimistic about Reddit as a business, but because I’m sure it’s going to be volatile, Zazzara said by email.
Noor Al, a 28-year-old senior analyst in Toronto for a private equity backed health-care company, said he intends to buy as many shares as Reddit will allow and may sell call options against the shares. Al, who moonlights as a moderator for WallStreetBets, said the forum’s sentiment toward the company’s stock is largely negative.
People see it as a poor investment, and they generally hold unfavorable views toward the company, Al said. When public sentiment is so strongly negative against something and the underlying business is improving then that’s an opportunity.
But, Al added, like anything, if the price becomes attractive, I would sell.
