Reddit To Go Public With IPO — Can It Be Classed as a Meme Stock?
Reddit announced on Wednesday that it had filed for an initial public offering with U.S. securities regulators. In September, the platform had sought to hire advisors to help facilitate its going public. This signals that its intentions had been in the works before the filings.
The messaging board platform was the go-to destination in 2021 for traders hoping to cash in on meme stock mania. The frenzy saw Redditors and the US congress align to battle against Wall Street and trading platform Robinhood.
Reddit Aims To Increase Its Valuation
Reddit hopes to increase its valuation from the current $10 billion to over $15 billion when it is floated. Although reasonable, its $10 billion market capitalization pales compared to Twitter ($35 billion) and Meta, formerly Facebook ($1 trillion).
Steve Huffman, Alexis Ohanian and Aaron Swartz, in 2005, founded Reddit. It gained prominence for its niche discussion groups but trailed in popularity to other major social media platforms created around the same time. However, in 2021, it witnessed explosive growth as retail investors used the platform to give tips on trading meme stocks. As of August, it had around 52 million daily users with over 100,000 active subreddits.
February saw the company’s value more than double to over $6 billion. In August, it held a fundraising round led by Fidelity management. $700 million was reportedly raised, with its valuation reaching $10 billion.
Details concerning the public offering are still vague. The San Francisco-based company stated that the number of shares and recommended price range for its IPO was yet to be finalized. According to them, the listing is likely to occur once the Securities and Exchange Commission (SEC) completes its assessment process. They are, however, hopeful that its floating would occur early in 2022.
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Will Reddit Be A Meme Stock?
Immediately after the announcement, Redditors quickly dissected the news and expressed their opinions. Many see it as an opportunity for more fun and even profit from it like meme stocks. A post by u/jordanttay sums up the thinking of Redditors on the matter. On the one hand, people want to support the IPO; however, there are concerns with what Reddit would become after its listing.
On the popular r/Wallstreetbets — the subreddit that popularized the meme stock frenzy — some members were concerned that a stock market listing would signal the end of Reddit’s free-spirited culture.
One of the major concerns users have is increased advertisement on the platform. A Redditor u/notbrokemexican, however, tried to debunk such fears. He posited that Reddit’s new move could see it become modeled after gaming platform Roblox, something Reddit’s CEO Huffman has alluded to previously. This would see the social media platform adopt engagement-based payouts to its subscribers. The amount of time spent would be proportional to the rewards received.
If Redditors eventually decide to pump the stock, Reddit will easily surpass its target valuation of $15 billion. Still, with the IPO details and date not fixed, the platform will be hoping its users decide in its favor.
When it is finally floated, do you see Redditors giving the Reddit Stock the Meme treatment? Let us know in the comments below.