Reddit users were divided on whether they wanted to support the company’s IPO, but CEO Steve Huffman welcomed retail investors using the site to share their opinions, even if it meant lowering the stock price.
Reddit, an online network where users create and grow communities on their own based on topics or interests, debuted on the New York Stock Exchange this week at an initial price of $34 per share.
By Thursday’s close, shares jumped 48% to $50.44, valuing the company at more than $9 billion.
But earlier this year the company confirmed that some of its shares were given to some of its most loyal users in front of the general public.
IN Form C-1 Filed in February, the company added that the decision could lead to stock volatility.
The document even mentions one of its own communities – a subreddit called r/wallstreetbets – as a risk for the IPO, given “strong and atypical retail investor interest” in so-called “meme stocks” like GameStop and AMC, which have seen huge swings. .
But in the interview CNBC Huffman said yesterday that he welcomes dialogue between users, both positive and negative.
“First of all, I love betting on Wall Street,” Huffman said. “I’m a user, I’ve seen their comments over the last couple of weeks, so I just say hi to them. And this is Reddit, Reddit is about the people, Reddit is a fun and special, but sometimes crazy place.
“I wouldn’t expect anything less from our community.”
Are Reddit Users Looking to Sell Reddit Stock?
Investors on the site offered different views on how they wanted to handle the Reddit IPO.
One post wrote: “Reasons to Cut Reddit IPO and Make Big $$$$” while others counter, “Unpopular opinion: I’m bullish on IPOs and Reddit stocks.”
Huffman is right to take his community’s opinions seriously: Reddit investors have proven to be a powerful force in the past.
Hedge funds began betting against US video game and electronics retailer GameStop in 2021, but the retail investor community decided to fight back, driving up its share price to such an extent that US Treasury Secretary Janet Yellen called a meeting of key financial regulators to discuss the volatility. .
Huffman, who recently had to defend his $193 million salary package while the site’s moderators remain unpaid, doubled down on his praise for users when asked if he was disappointed by their response.
“I think they helped us get here,” Huffman said. “Reddit is nothing without our users and communities. I think what’s great about Reddit is that they tell it like it is.
“But you have to remember that they are doing this on Reddit. They love this platform, it is their home on the Internet. The team and I are honored to work on Reddit, but they truly are Reddit.”
While Huffman noted the decision to offer Reddit users the first opt-out of the IPO as a risk, he added that he did not consider it a “controversial” decision to offer those who helped create the platform a chance to benefit from its listing.
“The best Reddit investors are the people who use Reddit,” he said. “I want our investors to be users, and I want our users to be investors. We’re all building this together.”
Profitability Issues Reddit
When the platform, which is free to use, first began considering an IPO, questions were raised about how valuable the company really was, given the fact that it had never turned a profit in its 20-year history.
While complaints about the site With more than 73 million daily active users and more than 16 billion messages as of December 2023, profitability remains a “major milestone.” Huffman believes he is getting “closer and closer” to achieving it.
Concerns have also been raised about how Reddit plans to compete with other social media giants for advertising, which reportedly makes up 95% of its revenue as it operated at a loss of $90.8 million in 2023.
IPO documents filed online have lifted the curtain on how the company intends to turn around its fortunes.
This includes launching services so Reddit users can generate income for themselves, as well as using their data for search, artificial intelligence training and research.
The S-1 document states: “As the world becomes more data-driven, we deliver solutions that are human- and experience-centric. We expect our data strengths and intellectual property to continue to be a key element in teaching future LLMs.”