Matt Levine's Money Stuff: Reddit plans to allow users to buy IPO shares, Nvidia share purchases and Three Arrows Capital [a collapsed crypto company]

Just got the message on my very old reddit account:

Hello,

TL;DR: – you’re invited to a special program that lets redditors purchase stock at the same price as institutional investors when we IPO. Details about eligibility and next steps follow. This (long, dense) message has all the info we can provide due to legal restrictions.

As you may have heard, Reddit has taken steps toward becoming a publicly traded company with the initial public filing of our registration statement with the U.S. Securities and Exchange Commission on February 22, 2024. Yes, it’s happening.

And because you have helped make Reddit what it is today, you now have the opportunity to become Reddit owners at the same price as institutional investors.

We’re offering a Directed Share Program (“DSP”) that invites eligible users and moderators who have contributed to Reddit to participate in our initial public offering (“IPO”). (Including you!)

######Program Requirements

While being selected to pre-register is the first step, there are certain legal and regulatory requirements to participate in the DSP that are outside of Reddit’s control. Bear with us here…

To be eligible for the DSP, you must:

• Be a current U.S. resident;
• You will be asked to provide the DSP Administrator a valid social security or permanent resident number, along with other personal information. Reddit will not have access to this data.
• Please note that U.S. residents using a VPN may face application limitations if the VPN locates them in certain non-U.S. jurisdictions.
• Be at least 18 years old;
• Provide your full legal name and an email address;
• Not be a current or former Reddit employee (FTE).

When the DSP launches (a few weeks after pre-registration ends), individuals who have been confirmed for the program will be contacted by our external DSP Administrator. You will then be asked to provide additional information securely to the DSP Administrator to confirm your eligibility.

######How to pre-register

The number of people who can participate in the DSP is limited; we will offer this opportunity to as many redditors as we are able to accommodate. If capacity is reached before the deadline, you will be added to the waitlist. Based on demand, we may also limit the number of shares available.

If you are interested in being part of Reddit’s DSP, please go to https://reddit.com/dsp on desktop to complete the pre-registration form. If you are one of the confirmed participants, we will follow up with an email with more details in the coming weeks. You can also refer to the Frequently Asked Questions for more information. Due to regulatory restrictions (yeah… we know…), we are not able to respond to further inquiries or questions.

Pre-registering does not guarantee that you will be invited or able to participate in the DSP; it also does not obligate you to purchase shares.

As with any investment opportunity, you should make an individual decision based on your own personal circumstances and risk tolerance. Therefore, we urge you to review the preliminary prospectus, when available, before deciding whether to invest in Reddit.

The deadline for pre-registering for the DSP is March 5, 2024. If capacity is reached before the deadline, you will be added to the waitlist.

######What happens next?

While there won’t be a confirmation email immediately after you pre-register, everyone who pre-registers will receive an email in the coming weeks from “noreply@redditmail.com” telling them whether they can proceed with the next steps for the DSP.

This is an automated message (beep, boop, beep) and does not receive replies. Please refer to the FAQ for more information. Per our lawyercats, we are not able to respond to further inquiries or questions.

Prospectus and Important Disclosures

The offering will be made only by means of a prospectus. When
available, a copy of the preliminary prospectus related to the offering may be obtained from:
Morgan Stanley & Co. LLC, Prospectus Department, 180 Varick Street, New York, New York 10014, or email: prospectus@morganstanley.com; Goldman Sachs & Co. LLC, Attention: Prospectus Department, 200 West Street, New York, New York 10282, telephone: 1-866-471-2526, facsimile: 212-902-9316, or email: prospectus-ny@ny.email.gs.com; J.P. Morgan Securities LLC, Attention:c/o Broadridge Financial Solutions, 1155 Long Island Avenue, Edgewood, New York 11717, telephone: 1-866-803-9204, or email: prospectus-eq_fi@jpmorgan.com; and BofA Securities, Inc., NC1-022-02-25, 201 North Tryon Street, Charlotte, North Carolina 28255-0001, Attention: Prospectus Department, telephone: 1-800-294-1322, or email: dg.prospectus_requests@bofa.com.

A registration statement relating to these securities has been filed with the U.S. Securities and Exchange Commission but has not yet become effective. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This notification shall not constitute an offer to sell or the solicitation of an offer to buy these securities, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

No offer to buy the securities can be accepted and no part of the purchase price can be received until the registration statement has become effective, and any such offer may be withdrawn or revoked, without obligation or commitment of any kind, at any time prior to the notice of its acceptance given after the effective date. An indication of interest in response to this notification will involve no obligation or commitment of any kind.

If there's truth to this, and 75.000 redditors (who and why that number?) get to buy the IPO, at least some of the "IPO bubble"-demand is taken off market. That's surely a risk both to institutional investors in the IPO and regular folks who want to get in early.

It's also a risk because you've got fewer institutional investors in it for the long term.

This reads like a move of desperation. Who of the owners today really want their money out of reddit?

I'm struggling to see other compelling reasons to IPO with interest rates being so high (and everyone predicting they'll go down), unless the investors really just don't think they can make the site profitable and the financial outlook is just getting worse day by day as the least-bad ideas don't work and the company moves onto successively worse ideas.

Related news: Reddit files to list IPO on NYSE under the ticker RDDT

The social media company ... has raised about $1.3 billion in funding and has a post valuation of $10 billion.

Reddit said it has incurred net losses since its inception. It reported a net loss of $90.8 million for the year ended Dec. 31, 2023, compared to a net loss of $158.6 million the year prior.

On TV they also added (to the best of my transcription abilities):

Net income for the quarter ending Dec 31st is $18+ million. ~$250 million in revenue over those 3 months. 73 million daily active unique users. 267.5 million weekly active unique users. The usual big banks are underwriting Reddit's IPO.

Headline got my attention, but the paywall stopped me from reading further.

I know Steve Huffman was considering this for a couple years now (talked to him when he was in Germany)… I’m surprised they are still considering this after the backlash recently. I don’t know if they’ll have another GameStop moment here, it’ll probably be the opposite.