Reddit IPO: Redditors To Own Major Stake In Social Media Giant, Here’s How
Highlights
- Reddit is considering distribution of IPO shares to its loyal users.
- The move could prove to be risky for the company as well as its institutional investors.
- However, Redditors can grab this opportunity to diversify their investment portfolio.
Reddit is reportedly planning to offer a portion of its IPO shares to its and loyal active users. It could be a massive opportunity for Redditors to own a stake in their favorite social media company. However, the move also sparks concerns regarding Reddit’s stock performance after the IPO.
Redditors To Own Massive Stake In Reddit
The company intends to set aside shares for 75,000 of its most engaged users, known as Redditors, ahead of its public offering next month. This opportunity would allow users to purchase Reddit shares at the IPO price. It marks a groundbreaking move since this privilege typically reserved for institutional investors.
The specifics of the number of Reddit IPO shares allocated for users have yet to be determined, according to sources familiar with the matter cited in the WSJ report. Considering that several crypto enthusiasts offer massive engagement via different forums on the platform, they could be eligible for the opportunity as well. Reddit, headquartered in San Francisco and valued at approximately $10 billion in a 2021 funding round, has not immediately responded to requests for a comment on this development.
However, distributing shares among Redditors could be a huge risk for the company. These users could dump or sell their shares in case of unfavorable market conditions, negatively affecting the Reddit stock price after debut. Also, if most of these users are amateurs in the trading and investing arena, they could consider impulsive decisions that lead to volatility in the market. Moreover, institutional investors could also bear the brunt if the stock value plunges.
Also Read: Bitcoin ETF: BlackRock’s IBIT & Grayscale’s GBTC Plunge Pre-market After Weak Inflow
About Reddit IPO
Earlier, in January, Reddit had outlined comprehensive plans for its IPO, which will make its debut in March this year. The company has earlier filed confidentially for its IPO in December 2021. The IPO market has faced challenges over the past two years, experiencing low volumes and witnessing several new entrants trading below their IPO prices.
Hence, the Reddit IPO is bracing for uncertainty and the latest announcement could intensify the risks. However, optimism around Reddit’s IPO isn’t dead as it has been in the pipeline for three years now and would mark the first major social media company to go public since Pinterest’s debut in 2019.
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