Why Reddit Users Are Opposed to the Company’s IPO

Two years ago, Reddit users demonstrated their collective power by saving GameStop’s stock price from Wall Street traders. Now, Reddit itself is seeking to tap into that energy by allowing users to participate in the company’s IPO. However, this decision has been met with backlash from many Redditors.

User Backlash

Reddit, with its 73.1 million daily active users, is still unprofitable, despite a 21% revenue growth last year. Monetizing its audience through ads has been a challenge for Reddit, as its content is more freewheeling compared to other social media platforms. The IPO filing revealed that Reddit lost over $90 million last year.

The company has prominent backers like Tencent Holdings and Fidelity, but very few companies have gone public recently due to a turbulent stock market. Reddit’s decision to go public in 2024, as the first major tech IPO since Pinterest in 2019, poses risks in keeping both investors and users satisfied.

Now, many Redditors view the IPO as another instance of prioritizing profits over community. They worry that the company will cater to investors rather than focusing on the Reddit community. Critics argue that Reddit’s lack of focus on monetization is what makes it unique and reliable as a platform.

In an attempt to involve the community in the IPO, Reddit introduced a “Directed Shares Program,” allowing active Redditors to purchase shares at the same discounted price as major investors. However, many users expressed disdain for this program, seeing it as an attempt to manipulate them into pumping up the stock price.

Training Artificial Intelligence

Artificial intelligence has played a role in Reddit’s decision to go public. Reddit recently entered a licensing deal with Google to use Reddit data for training AI systems. The platform’s “data advantage” in AI training is expected to generate revenue. However, some Reddit users are concerned that AI advancements could lead to an increase in chatbots on the site, potentially undermining its usefulness.

The Wall Street Bets Factor

A significant factor looming over Reddit’s IPO is the subreddit r/WallStreetBets, known for its involvement in meme-stock investing. If this community becomes involved in the Reddit IPO, its collective power could cause unpredictable fluctuations in the stock price. The participation of Redditors could lead to increased volatility, as individual investors often sell shares more actively than professional investors.

The IPO experience of Robinhood, a stock trading app synonymous with r/WallStreetBets, serves as a cautionary tale. After going public, Robinhood’s stock price dropped significantly and failed to meet its IPO price. Users on r/WallStreetBets expressed dissatisfaction with Reddit’s IPO announcement, particularly regarding the compensation of the CEO compared to the lack of compensation for volunteer moderators.

Conclusion

While some Reddit users remain optimistic about the platform’s viability and the potential success of the IPO, the overall sentiment within the community is one of backlash and skepticism. Reddit’s decision to go public comes with the challenges of balancing the interests of investors and users, while navigating issues of monetization and community engagement. Only time will tell how Reddit’s IPO will fare and whether it can overcome the concerns of its user base.

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