The stock-trading enthusiasts of Reddit’s popular subreddit WallStreetBets, known for backing unconventional companies and sparking meme stock frenzies, are turning the tables on their own platform as Reddit gears up for its own initial public offering (IPO).
Shortly after Reddit filed for its IPO, thousands of WallStreetBets members, who boast a whopping 15 million users, voted to amplify a forum post advocating for shorting Reddit’s stock.
The scrutiny from this vocal community is unwelcome for Reddit, especially as it emerges from one of its most active and high-profile forums—a community that Reddit itself highlights in its filings with the Securities and Exchange Commission (SEC) as integral to its value proposition.
The development also comes on the heels of a court dismissal of a lawsuit brought by Jaime Rogozinski, the creator of r/wallstreetbets subreddit, against Reddit. The legal action was meant to seek a declaratory judgment that he, and not Reddit, is the rightful owner of the trademarks “WALLSTREETBETS” and “WSB.”
Lukas Muehlbauer, a research analyst at IPOX Schuster LLC, noted the significant negativity surrounding Reddit’s IPO within the WallStreetBets community, suggesting that any potential positive movement in the stock wouldn’t likely be driven by them.
Previously, Reddit’s involvement in market stories typically signaled enthusiasm and support, particularly from WallStreetBets, whose antics have gained widespread attention and even inspired books and a Hollywood movie. However, the recent posts critical of Reddit drew attention from just a fraction of the forum’s vast user base, yet they garnered significant engagement and upvotes, indicating a notable shift in sentiment.
Comments across other subreddits, such as Investing, were more varied, with some expressing interest in buying shares while others remained cautious or critical.
The criticisms from WallStreetBets members focused on Reddit’s use of volunteer moderators, concerns about employee stock sales during the IPO, and skepticism surrounding the company’s artificial intelligence ambitions. Some even suggested buying put options.
Reddit has recently revealed its intention to go public on the New York Stock Exchange under the symbol “RDDT.” This move marks the first IPO of a social network since Pinterest’s debut in 2019.
Analysts are projecting the offering’s valuation to be somewhere in the $5 billion range.
The negative sentiment stands in contrast to Reddit CEO Steven Huffman’s letter within the IPO filing, emphasizing user ownership and their passion for the platform.
“They come to Reddit to participate in a vibrant community, a constantly evolving place where anyone, anywhere, can connect with like-minded people and dive into any topic,” said Huffman.
Reddit will be keen to avoid a fate similar to Robinhood Markets Inc.’s 2021 IPO, which saw volatile trading and significant fluctuations in share price post-debut. The upcoming days of Reddit’s trading debut will be closely monitored, with speculation swirling within the WallStreetBets community about potential trading strategies.
Information for this briefing was found via Bloomberg and the sources mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
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