Reddit has never turned a profit in nearly 20 years, but filed to go public anyway::Reddit, the message board site known for its chronically online userbase and for originating much internet discourse, filed for its long-anticipated initial public offering on Thursday.
The REAL value of Reddit that tends to get overlooked in these conversations about Reddit’s measurable value in the IPO has nothing to do with its use or its users, but (1) in its ability to influence public opinion and (2) its possession of users and data to sell on, including being a platform for ad delivery to millions of eyes.
Now look at its majority owners: Conde Nast, Tencent (China), and Sam Altman (AI). There are some who believe this is coincidence. But I believe where there is money, there is no such thing as coincidence.
Reddit has already proven that it has never made and will never make a profit in and of itself, yet the cash continues to flow. That’s because Reddit management is structured around churning Reddit’s secondary benefits into wealth for itself, and nothing else.
Look at their actions, both in the short term and in the long term. Regardless of their words, the owners have proven incontrovertibly that neither the users nor even the usability of the site means jack shit to them.
It’s ALL about advertising money, being able to steer public discourse, and scraping data wherever they can find it. That’s the real product.
Thus it’s a pretty certain guarantee, IMO, that anyone who isn’t already on the Reddit board or an owner of Reddit will lose whatever they invest in the IPO, because Reddit is NOT about social media, or providing/creating value for its users. Reddit is solely about scraping the secondary benefits that the users provide and selling them off for the benefit of the few.
Even the selling off of pre-IPO shares – normally reserved for those already involved in the ownership or financing of a company about to go public, because pre-IPO shares can offer massive gains if the IPO is successful – should tell you that they expect RDDT to instantly sink. Why on earth would they give those sweet pre-IPO shares up to the unwashed masses if they thought there was even a remote chance the IPO would at least break even?
This IPO is complete shit, lol. And what’s even funnier is that the C-suite of Reddit is SO used to pulling fast ones over on their users that they aren’t even trying to hide it. I feel sorry for anyone buying these shares, because they are going to tank on day one. There’s literally no value there, other than for the rich boys already skimming it off the top, and this IPO is their final skim.
I suspect it’s because they’re worried that their users are going to short them and encourage others to do the same, so they’re trying to get them involved and committed. They don’t want WSB causing shit. My guess is that the share prices will do pretty well, at least initially. There are plenty of ignorant investors who want to get in on the next big tech stock. Just a guess though, I don’t know enough about this stuff to invest in stocks myself.
To short a stock is kind of difficult to do on an IPO because you have to borrow a stock to short it, and pre-IPO only the underwriters have that stock, and are not usually lending it out. Naked shorting – where you don’t actually have a stock but you sell it anyway, lol – is illegal. I know there are a lot of folks talking about shorting RDDT here but you have to actually borrow a stock to short it.
More likely is that Reddit’s trying to get people to buy at a fixed price before it tanks, because any shares purchased pre-IPO are guaranteed cash at a set rate for them, not subject to the trading volatility that will come with the IPO. I think that’s why WSJ is calling Reddit’s strategy an “unusual IPO wager.”
So far this year it’s been a rocky start for IPOs anyway, many are trading below IPO value, even companies that have more in the way of tangible assets than Reddit. But the clock is against them, the Reddit board pretty much has to do it as soon as possible or fight the added market volatility that comes with an election year, among other reasons.
I’ve linked a couple of articles; the second one especially is very helpful. It talks about a similar situation, a healthcare company called BrightSpring with a heavy debt load looking for capitalization that went for an IPO in January 2024, and how they spent their pre-IPO time trying to talk investors into buying at a set price beforehand because that’s how they could still get some cash out of an otherwise shitty IPO showing. Personally, I think this is exactly what Reddit is trying to do, and what this car-dealership style hawking of pre-IPO shares via email is trying to accomplish for the Reddit board.
Archive links:
WSJ: Reddit Plans to Sell Stock to Loyal Users in Unusual IPO Wager
WSJ: Will the IPO Market Spring Back in 2024? The First Big Debut Offers Clues