arstechnica.com Reddit faces new reality after cashing in on its IPO by Hannah Murphy and Anna Mutoh, Financial Times - Mar 23, 2024 10:10am UTC 5 - 7 minutes Reddit must now answer to its shareholders as well as its vocal users.
Steve Huffman, u/spez on Reddit, sold 500,000 of his shares in Reddit’s IPO on Thursday
AFP via Getty Images
In an interview on the New York Stock Exchange trading floor ahead of Reddit’s market debut on Thursday, chief executive Steve Huffman acknowledged that the mischievous retail investors that congregate on the social media platform might deliberately drive down its share price.
“It’s a free market!” he said.
For Reddit, as for Huffman, the bet on a public offering for a site he described as a “fun and special, but sometimes crazy place” has appeared to pay off.
Shares of the social media company soared on its Big Board debut under the ticker RDDT, closing at $50.44, or 48 percent above its IPO price. This brought its fully diluted market capitalization to $9.5 billion, close to where the company was last valued privately at $10 billion in 2021.
Reddit’s journey to public markets marks a turning point for a fringe, free speech-oriented platform dominated by esoteric memes, sardonic humor, and gamers, as it transforms itself into a more mainstream discussion hub that enforces stricter moderation rules in order to attract advertising dollars.
The picture for its earlier investors was mixed. One big winner was the Newhouse family, who through Advance Magazine Publishers Inc own Condé Nast, which bought Reddit in 2006 for $10 million before spinning it out in 2011. Its shares are now worth about $2.1 billion, a handsome windfall to their publishing empire, which also includes Vanity Fair, the New Yorker, and Vogue. Entities affiliated with OpenAI chief executive Sam Altman now hold a stake worth $613 million.
But investors who put money in at the last financing round in 2021 at $61.79 a share, such as Fidelity, were looking at slightly less on that particular investment.
Founded in 2005, the self-proclaimed “front page of the internet” has battled through management upheaval and moderation scandals to grow to 73 million daily users across its 100,000 communities, or “subreddits,” per Reddit parlance. It is a social media minnow, however, relative to Meta or X, which have more than 2.1 billion and 245 million daily active users, respectively.
Still, its IPO attracted institutional interest. Demand was strong, and the top two dozen investors in the deal, who received the majority of its shares, were typically large asset managers who intend on owning the stock for the long term, one person familiar with the matter said.
Reddit’s surge on its first day of trading, a day after AI infrastructure group Astera Labs jumped 72 percent in its Nasdaq debut, also signals a validation of public investor demand for listings—even a company that is unprofitable, such as Reddit.
“Overall, this is a very positive development for IPO markets [and] should bode well for many of the pre-IPO companies sitting in the queue,” said Christian Munafo, chief investment officer of Liberty Street Advisors.
But, Munafo said, “while [Reddit] performed well out of the gate, the stock may come under pressure unless they are able to demonstrate better growth and monetization.”
Either way, the deal is a boon for Huffman. The chief executive sold 500,000 of his shares in the IPO, cashing out a plump $17 million, and is due to receive additional equity awards as a result of listing the company above a $5 billion valuation. He also received an estimated $193 million pay package last year, mostly made up of equity awards, according to filings.
Historically, Huffman’s style as a leader has reflected that of Reddit’s unruly user base. The self-confessed “internet troll” initially squirmed at the idea of policing the more extreme communities hosted on the platform, relying on these groups to create their own rules and self-moderate. He has defended and cheered on Reddit’s WallStreetBets trading forum that shot to mainstream fame when members collectively bought so-called meme stocks in a bid to squeeze hedge funds*.
But Huffman has recently been forced to tidy up the darker underbelly of the platform for advertisers, present a more professional front to Wall Street and hunt harder for profitability. As a result, Reddit has shifted its ambitions slightly to pin its fortunes to wider tech trends. When Reddit first filed for an IPO in 2021, AI was mentioned once in its prospectus. In the 2024 version, AI appeared more than 60 times.
Nevertheless, the approach has left Huffman and the company at odds with some Reddit communities, who have been resistant to any changes to the platform. Facing new pressures as it enters public markets, some analysts warn that Reddit’s character could be destroyed and users may seek out alternatives, in a drag to the company.
“Reddit, more so than many social media platforms, has been a very community-based, non-commercial space and people know and love it for [this],” said Samuel Woolley, a propaganda expert and assistant professor at the University of Texas at Austin.
“I think the big question that should be on everyone’s mind for Reddit is to what extent the IPO will change the very nature and fabric of the platform.”
Additional reporting by Nicholas Megaw in New York.
Here we go "“XavlegbmaofffassssitimiwoamndutroabcwapwaeiippohfffX (abbreviated as Xavleg, aka Acidic Vaginal Liquid Explosion Generated By Mass Amounts Of Filthy Fecal Fisting And Sadistic Septic Syphilic Sodomy Inside The Infected Maggot Infested Womb Of A Molested Nun Dying Under The Roof Of A Burning Church While A Priest Watches And Ejaculates In Immense Perverse Pleasure Over His First Fresh Fetus) is a South African deathcore/ Christian music/ deathgrind/ death metal band. Its members rarely consider themselves Christians.”
I also do not personally believe in yet another slicing of the communities into different platforms, and if Sublinks aren’t integrated into Lemmy - requiring new communities or separate accounts - I will not be following along. Of course, somebody else could always take over my communities in that event, but I just wanted to let out my opinion on this.
Sublinks would work th same way as Mbin does. People on Mbin can currently interact with all the Lemmy content in a similar way Lemmy users do.
The reason this effort didn’t work and most of these communities reverted back was the extreme fragmentation and confusing nature of the early Fediverse.
To be fair, when the migration happened, Lemmy wasn’t ready. Federation was still flimsy, and LW was under constant DDoS attack. Lemmy is in a much better state now.