WALL Street is about to witness one of the most anticipated IPOs of the year. The social media platform Reddit, which has been around for almost two decades, will go public, scheduled for Thursday.
5 things to know about Reddit
Not new
Reddit was founded one year after Facebook, in 2005, by Steve Huffman and Alexis Ohanian, two computer science graduates from the University of Virginia. The site was originally planned much the same as it is today: as a way to share and discuss interesting content from around the web.
The name “Reddit” is a play on the words “read it,” reflecting the site’s initial focus on link sharing and discussion.
The site’s appearance is an unadorned return to the early days of the internet, when message boards, forums, and blogging dominated online conversation.
New Yorker, Vogue and… Reddit?
Not long after its launch, Reddit was acquired by Conde Nast Publications, publisher of high-end glossy magazines such as Vogue and The New Yorker. The site’s community approach and low-key moderation ethos have gradually attracted a loyal user base, especially among the tech-savvy who avoid Facebook or Twitter.
But unsure what to do with the loss-making (and off-brand) platform, Conde Nast spun off Reddit in 2011, effectively giving it back to venture capitalists.
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The company is attracting new investors such as Tencent, China’s digital giant. Future ChatGPT star Sam Altman led a fundraising round in 2014 and only briefly became CEO.
Ask Me Anything
Reddit is essentially run through thousands of “subreddits” – forums moderated by their creators. The largest subreddits have tens of millions of subscribers, including r/funny, r/games, and r/music.
Some customs on Reddit have become social media standards, including AMAs, or Ask Anything sessions where users can ask any source during a certain window of time.
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Subjects who have participated in the AMA include some of the world’s most influential politicians, famous scientists and athletes, as well as ordinary people with interesting jobs. In 2012, then-President Barack Obama nearly crashed the site during his AMA.
Subreddits are so important to the experience of the site that Reddit allocated eight percent of shares to subreddit moderators and top users, so they could participate in the IPO.
r/wallstreetbets
Reddit made headlines when in 2021 a group of small-time traders on the subreddit r/wallstreetbets helped push up the share price of GameStop, a video game retailer — squeezing some of Wall Street’s savviest investors who had bet against, or shorted, the company.
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The event was made into a Hollywood movie, “Dumb Money,” and made Wall Street wary of the volatility of so-called “meme” stocks and the power of social media to shake up financial institutions.
In its IPO filing, Reddit warned that due to the whims of r/wallstreetbets investors, who may one day decide to blame Reddit itself, the stock price “could experience extreme volatility.”
Never Make a Profit
Despite being almost 20 years old, Reddit has never turned a profit and many Wall Street observers are wary that the company’s stock is not a safe place to put your money.
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According to its financial report, Reddit experienced losses of US$90.8 million last year and US$158.6 million the year before.
For most of its history, the company wasn’t particularly interested in making money, and Reddit’s CEO and founder, Huffman, said it wasn’t until he returned to Reddit in 2018 that he began to set a path to making a profit.
This is not always easy, considering that the user base of this site tends to be independent and does not like other social media sites that are full of advertisements such as Facebook or Instagram.
To appease advertisers, in 2020, Huffman broke with company dogma and implemented stricter content moderation policies, much to the annoyance of some of the site’s loyal users. (AFP/Z-3)
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