38
votes
Reddit is letting power users in on its IPO
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- Authors
- Robert Peck Paresh Dave, ron Tau, Julian Chokkattu, David Nield, Kate Knibbs, Paresh Dave, Dexter Thomas, Brian Barrett, Steven Levy, Will Knight, Amanda Hoover, Morgan Meaker
- Published
- Feb 23 2024
- Word count
- 551 words
If they were serious about this they would be gifting shares to such users free of charge (assuming eligibility ofc). As it is, they're "generously" allowing the users they've repeatedly screwed over and insulted the "opportunity" to loan them money at a discount, a transparent attempt to juice their shares, meme stock-style. But they've wrecked tons of goodwill and their questionable financials, business model, and leadership make it a risky investment even from a pure numbers standpoint.
Reddit sucks but giving shares ways for free would be absolutely insane for a company to do. Investors and the board would not likely be on board with that. There’s very little reason companies would do something so generous out of the goodness of their heart. Even if they wanted to be generous, there are much more helpful ways to give away free money.
not even if 10+ year old accounts = 1 share? how many of those accounts are even still alive
First, I think there's a TON of active 10+ accounts. Pretty sure mine is (not that it's active but if it meant free money it sure as shit would be for however long that took).
Second, it doesn't matter if there's only 5. It's just not the way to approach something like this, and I'm not even sure it'd be above board. IPO's aren't just "do what you want" willy nilly, that's really the whole point. You now have a board to answer to.
Plus you have all the people with 50+ alts.
This isn't really a problem for them because to sign up for the IPO you need a valid name and address. You can't just buy stock with the name PM_ME_YOUR_ASS
Ahh, didn't know that. That makes sense. Thanks.
The ability to get your friends together and say you've got 40 alts with different spellings of PM_ME_YOUR_ASS so if they each claim one they can split the profit is basically impossible to verify if done right.
And depending on the money could be trivial (if stupid) to involve others. Naturally your entire family has been posting on such accounts.
I think what you're describing is fraud
Absolutely. So now you've probably got several thousand users making claims that are going to be next to impossible to easily verify, but are likely illegal.
Just because its fraud doesnt mean people wont try it. You're just asking for a boatload of headaches by trying to give out stock to users like this.
There can't be that many. They don't even bother making badges past 15 years.
Wow, you're right -- I just looked, my account is 16 years old, almost 17, but only has a 15 year badge.
I thought when it first happened that they were running behind, but they just stopped. I'd been eager to get rid of the 15, it looks like a pencil and some crumpled paper stuck in something gross with flies around it.
I’m at 11 and I’m part of the group that jumped with diggs downfall. So yeah, there’s a lot
I'm no securities expert, but companies grant free stock to employees all the time, no? It doesn't seem like a stretch to also include a narrowly-defined class of mods, contributors, and other users who were important to the early growth of the company, subject to verification and eligibility. It might not be a common thing, but it would back up Reddit, Inc.'s claim of wanting to recognize and reward the people who helped make its success possible. Closest thing to that was the longstanding gold/rewards system, which they completely destroyed with no replacement.
When I get stock grants there's a bunch of legalese I have to sign, every time. And someone to audit it, I'm sure. This would be a total nightmare. Are they old enough? What about the tax implications? Etc etc.
I mean, the pre-IPO purchase offer comes with a lot of paperwork and compliance stuff, too, and that's apparently going out to a much larger pool of people (including those outside the US who are legally barred from participating). I don't think that's what's stopping them here.
RSUs aren't exactly free. It's an agreement as part of your compensation package. e.g. when I was hired, I was told I'd make a base salary of $x plus $y worth of shares, and those numbers have gone up as I've received annual raises. If I didn't get those shares, they'd literally be stealing a large chunk of my salary.
I mean, they are free in the sense as opposed to something like ESPP they are being granted to you for no direct cost.
They might be contractually obligated to do so as part of your general compensation, but they could also have just offered you the ability to purchase stock for a given price or reduction thereof.
Companies called it loyalty once upon a time. You're thankful for the people who got you where you reward them with the goodwill they granted you. Cynically speaking, it was simply a retention scheme to keep people from jumping ship to competition.
But these days I may as well be talking about unicorns and dragons when talking about such concepts.
It is 100% being done as a financial incentive to keep the most prolific "assets" from jumping ship. Their attempt to label it otherwise is just PR. They want to prevent a Digg situation. Simple as.
Well that's because this isn't a serious look for investors. This is the 'dump' part of the pump and dump, they're looking for bag holders.
Of course, knowing this stock market there might be even dumber bag holders out there for power users to offload shares to. but there's no guarantee of that, and if you give reddit money in this DSP my opinion as a risk averse investor is that you are a mark.
I got an invite. Should I short it, or is that asking to get burnt every bit as much as actually investing?
You can’t short an IPO, that’s not how it works. If you want to short it after it goes public, sure, although I’d suggest buying puts instead to limit potential costs.
The only thing worse than buying stock in Reddit is taking financial advise from social media.
I got an email Monday and I only have about 10K post karma, which isn't that high. I assume they have offered this to a huge chunk of users with the hope to hype it up.
Indeed. I got an invitation last week. Probably since I'm longtime user, mod, and have almost 100k karma. But now I keep seeing more people saying they've gotten invitations; even to accounts that have lain dormant for years and years.
I wonder if they're not getting the response they hoped for. While I did "pre-register," I don't think I'd actually buy any. I've been on reddit for like 14yrs. And during all the time, they couldn't figure out monetization. Or much of anything, really. Aside from them selling data to LLMs, I can't imagine they have much up their sleeves concerning monetization for the future without further debasing the experience. Not that that'd chase large groups of users away, but I can't imagine people would be willing to pay for much. Hell, reddit gold and awards were thrown out. And that seemed surprisingly popular.
Yeah looks like I got a message today offering this to me, and I have <1000 post karma. I have >40k comment karma and my account is >10 years old. If there are actually any criteria for who they are making this offer to, it doesn't seem very high. Granted I'm sure my activity was higher than typical so if they are just trying to target users that participated on the site actively in some way then my account would likely be a decent target.
I read some comments saying that the threshold was 25k combined post and comment karma. My karma numbers and account age are in the same range as yours, and I got an invite too.
I got the notification for one of my alts that I haven't even logged into since before the pandemic.
I got an invite to participate in the IPO. I'm a longtime Reddit user with a few hundred thousand in karma.
I pre-registered for it mainly out of curiosity, but I'm extremely doubtful that I would actually buy any shares. I long ago realized that I don't have the expertise or attention span to effectively invest in individual stocks, so I stick with mutual funds and ETFs. Seems like most social media stocks tank after IPO anyway.
I just buy VOO. No complaints.
I got that email. I'm just shy of 7k post/45k comment karma on a 14 year old account.
They're desperate to get users to buy in if they've resorted to sending me an email when I haven't been an active user for 8 months now.
I have under 2k post karma and barely 30k comment karma, inactive for nine months, and I got one. I'd assume they invited basically everyone.
I actually have a pretty active account, but I assumed they were just sending these to everyone. Irrelevant to me anyway since I'm not American.
Their S-1 is here, if anyone's interested. I haven't had the time to check it out myself before.
As for the stock itself, if I had the option to short the stock, I would. The company hasn't had a net profit quarter since its inception and have no solid plans but shove more ads into its highly opinionated and easily irritated audience. Their only true asset is their data and we know how much that's worth.
To my ignorant eye, this just seems like an exit for founders and investors.
Yeah, I don't want to get caught holding anyone's bag with this. I cannot conceive how Reddit could turn around from floundering perpetually to growing, popular, and successful to make having stock worth it. More likely, the train is barrelling towards the cliff and the current leadership is excited to make it someone else's problem. The site's quality is at an all time low, that doesn't raise my confidence as a "prospective investor"
I have just been spending this past week cleaning up a flood onlyfans spammers from a subreddit I used to moderate (I made sure to add another mod when I left Reddit for Tildes). I just happened to realize it was happening when I clicked on a reddit search result on my laptop where I'm still logged into my reddit account and I was greeted with 80+ reports, 10+ modmails, and comments/username pings about the state of the subreddit. I was so shocked and embarrassed because many subreddit members were obviously upset over the degradation of the subreddit. And while I was cleaning I saw some users mentioning that the onlyfans spam was happening to other subreddits too.
When I got the IPO email from Reddit I was like "Are you serious?" They're clearly scrambling. It's pathetic.
I'm seriously debating shorting it by making a play for the founder exit around conclusion of the lock out period. I know it's normal 30-90 days, but have you seen what it is for this IPO?
It was 60 days, I believe.
Everyone here is saying they got an email. Meanwhile I don't have an email linked to my account, so I only got a message on reddit itself. This just made me realize that the fact they're offering it to people without emails tied to their accounts is probably not the best move.
People were getting messages sent to their bot accounts. They're clearly casting a wide net and counting on the FAQ/signups process to filter out people who aren't actually eligible.
I just got a bot message inviting me, as an non American, to go in for the IPO.
I didn't get an email - I got a message sent to my Reddit account.
I had the email a while ago on my high karma account and this week on a much lower karma'd account.
It's available to US redditors only. Not that I'd buy any even if I could.
I'm not from the USA and I got the email today.
They probably don't know you aren't from the USA though. I got the email too, but am unable to participate.
Previous discussion: https://tild.es/1ef8
What could happen to Reddit if they had a bad IPO?
Employees may become disgruntled because their realized comp is lower than their expected comp.
If they need to raise money via capital it may be more difficult, although still probably easier than doing so via private markets.
Probably the expected trajectory. They IPO, Spez stays a year or however long mandated, Spez takes off in 2026, companies looks for other company to acquire reddit. They sell off and the drain spirals further and further because social media sites will do anything to try and profit except satisfy the users who sustain it. All the while, users slowly leave to other sites as Reddit fades to irrelevance.
These IPOs rarely seem to have long term sustainability. The people being catered to for this are not the ones who helped make the sire so valuable to begin with. I don't see how we get a "good IPO" because that's not really the aim to begin with.
Facebook's stock launched in May 2012 at $38 per share and ended the day a few cents higher. By August it was less than half that. Later that same month the FTC cleared Facebook to purchase Instagram and it's pretty much been a bull run since then, aside from about a year between 2021 and 2022 (though it's currently made that up in spades).
Share prices are based on speculation; IPOs doubly so. It might be inflated or it might be a value, but without much financial history it's anyone's guess. If they don't get what they're expecting then they'll adjust pending expenditures accordingly, but I doubt you'll see any big changes publicly within the first quarter unless something else bad drops.
I would guess most IPOs are pretty bad.
It's a private company, for some reason, deciding they want public funds at EXTREME costs to how they have to do business moving forward.
Being literally a source of funding, its almost always marketed to high hell, so the odds of the IPO being underpriced strike me as extremely unlikely. Still this is just my amateur intuition not any fact, but if the IPO is "bad" then they're still fine? Rich people get less rich mostly.
I got an email. They are offering entry at the same moment as institutional investors, which I assume means before it is available to retail investors... I'm not very familiar with IPOs
Yes, which is extra sketchy because in many cases the initial price DROPS as tons of shares are sold and IPO's (especially of tech) are super overvalued.
The ugly vibe is probably to make people think they're being let in on something they normally wouldn't have access too (which is true) but on the other side of that it's not something that's worth having access too in most cases.
Further most IPO's only allow very high networth investors, who can afford the hit should the stock tank. This is probably going to get a whole lot of "retail" investors who are going to get screwed should that happen. I get that "well only the rich can do this" feels unfair, but at the same time this feels like preying on people who won't be financially responsible with the decision and instead way too emotional, and will have a much worse time dealing with the consequences should it go bad.
Personally I don’t see how reddit can improve. They’ve never been profitable. Their most exciting lately is they have a deal with openai. They’re actively selling data to fund a product that will actively make their own less attractive to their own clients. Users get a less enjoyable experience and use the app less. Advertisers don’t want to pay for their stuff to be shown to a bot eco chamber. Pivoting to video content is probably helping with that, but I don’t see it catching up to tiktoks numbers soon.
To be fair this is literally a community made up of people who left or aren't happy/satisfied with reddit.
Plenty of others are. There's a strong argument that they can milk a lot of money out of the AI companies IF they haven't already been mined to death before anyone caught on. Doesn't mean it's a good product, but lots of dumb products do well, or have the mass appeal to last much longer. Amazon and friends sorta helped kick the whole "you haven't been profitable in years...." logic to death, even if its actually still sound.
There's no liquid market before the IPO so the banks running the process will run a roadshow with investors to get indications of interest / price they're willing to pay etc. Given the uncertainty / lack of track record the price is normally set including an IPO discount (>10%) to compensate investors for this.
Oh wow! I got the email for it this morning. No thank you.
They keep sending me DMs about this. I'm not american. They know I'm not american. I don't need to be told three times in a row that you're offering this wonderful opportunity (heh) to other people.
Got the "Directed Share Program invitation" email, Current price range of the IPO: $31.00 to $34.00 for those interested.
https://variety.com/2024/digital/news/reddit-ipo-stock-listing-valuation-1235938118/
This would be their answer to their moderation and content contributor problems. They know they can't actually afford to pay wages for that much human curation power, so instead they'll promise you two hamburgers next tuesday for your kind support today. Kinda impressive, honestly... they exploit the user's data and are now offering to let the users pay them for the privilege of being exploited.
I don't think those concepts have anything to do with each other to be honest.
I think they are hoping it'll drive user investment in the site - not just in the financial sense, but in the time and effort people put forward because they want their various communities to improve. They lost a lot of that over the last few years. A lot of communities moved on, collapsed, or lost a lot of their original contributors to various other forums, like this one.
They can't pay for it, but they can dangle the carrot and hope enough saps fall for it.
I don't think that really makes sense, though. For one, it's not much of a reward. Second, you only IPO once to begin with. It's not going to incentivize anyone to "come back" when it's not a recurring event.
I think it's just similar to what Robinhood did, which also offered IPO stock to its users. Just a meaningless gesture. It's not particularly a sign of anything.
It's basically to pump the IPO itself. Someone mentioned the process above: it feels exclusive to redditors to get in early, but it's just giving more hype to the IPO. Which tends to drop immediately and never come back up because surprise: many in this day and age just cash out as soon as they are able to.
This isn't a good deal unless you are very optimistic about the long term trajectory of Reddit. Otherwise you may as well wait for the hype to drop and buy shares cheap.
It'll incentivize kids to play their little game, where people give reddit real money and hours of attention, then get nothing back in return except shiny bits. That's their business model, after all.
I’m not sure I follow. What does that have to do with Reddit’s IPO? Is it that kids will buy into the IPO? I’m pretty sure there’s an age restriction as per SEC regulations.
I hope /r/PayYourMods shitposting takes off. Far too long have they labored tirelessly for $0.00
First "you get to buy a share in the IPO" is not "we are paying you" – it's the other way around: they are literally offering Reddit users the 'opportunity' to buy shares from them (i.e. the money transfer is the other way around).
They might not be able to pay people actual salaries, but they could certainly pay some moderators something which is better than paying nobody anything. For example they could pay the moderators of large subreddits (really tough job which generates massive value for Reddit) a decent-ish wage. Note that
Yes, I would say so. In both cases you are dealing with gigantic populations including enthusiasts, hobbyists, newbies, and professionals; and in that last group especially, their aims are not necessarily in line with your values (eg companies wanting to promote themselves). But with reddit, the general population is aware of this, whereas with wikipedia, the general population is going to trust the results of your moderation.
Also, wikipedia (from the pov of a volunteer editor/tool developer) is WAY more technically complex than anything you could possibly want to do with reddit bots. Consider the translation support alone; everything you make on wikipedia has to be possible to translate into like 200 languages, so you cant ever hardcode any strings, and you can't even rely on simple string interpolation when designing interface messages. And wikipedia cares a lot about performance of the code that volunteer admins write, in a way that no one on reddit ever will. Also, accessibility matters a lot more to Wikipedia than it does to reddit.
And the way Wikipedia works is that you have WikiMedia creating the underlying software, but then on top of that you extend with PHP extensions (installed on the server) and Lua modules (saved to the wiki itself). There's a balance between what becomes an extension and what you do on-wiki in Lua, and any time you create a new piece of code, you aren't just deploying it, to your tech stack, but you're deploying it to the entire community of editors who will now have access to abuse the functionality and write potentially malicious (or incompetent which could be worse) code affecting a lot of pages.
You have to balance the social aspect of: we want more volunteers so it should be easy to edit, so we should have more tools and make them available to more people, vs, we need to lock down anything that could potentially disrupt the site. So regular everyday users become essentially part of your tech stack.
In short, it's a complicated social environment & a complicated tech environment, and the two are the same environment.
source: I've been working with (third-party) mediawiki sites for about 10 years
Reddit is doing a ton more media hosting than wikipedia is. That’s probably most of their operational complexity.
I'm tempted even with finding out that that evil SOB Sam Altman is behind the scenes. This one has legs in the short term. Tech has been taking a beating with layoffs and this IPO will be good news for the tech sector.
but if we can tank we hurt Altman's rep with investors and that would be a good thing.