Popular social media platform Reddit files for initial public offering (IPO) this week as they look to take the company public. At the moment, the valuation that they are initially hoping for stands at $15 billion. Despite its 16-year run, it is still a far cry from Facebook’s valuation, and Twitter which are deemed to be competitors.
Steve Huffman, Reddit’s Chief Executive, and co-founder talked about his vision for retail investors investing in Reddit. “I want our users to be shareholders and I want our shareholders to be users,” he said at Wall Street Journal’s Tech Live conference in October.
Meme Stocks
As of late, Reddit plays a fundamental role in the “meme stock” era. Meme stocks are basically stocks that are fueled by the social media craze wrapped under risky analysis and fundamentals. Earlier this year the GameStop saga was one of the notable examples. WallStreetBets, A popular subreddit, which is basically a sub-community under Reddit made headlines.
They basically drove the stock up based on information that inside investors were driving the stock down. It worked almost to perfection, as they all collectively bought GameStop’s stock and wiped a large portion of short positions. Millions were lost and it led to Robinhood, a retail trading platform to pause trading.
This was a controversial move at the time and is still under investigation today. Reddit is hoping that its collective communities can invest in the platform and sustain it for the future. This is a pretty interesting concept and we could see an entire company being fueled by its userbase. Probably Reddit could also become the next meme stock.
Playing Catchup
Reddit is still far behind social media platforms such as Facebook, Twitter, and new incumbents such as TikTok. Growth might pose to be a problem for investors who would want to see how it can stay relevant within this era. In the second quarter of 2021, they generated $100 million in advertising revenue. For Reddit, that’s pretty impressive as they have tripled their revenue from a year ago.
If we should take a look at Facebook, they generated $85.9 billion in 2020, and Twitter $3.72 billion. You can see that from an advertising perspective, they are behind as certain brands don’t necessarily see it as an advertising option.
Reddit’s recent purchase of Dubsmash, an app similar to TikTok gives us an idea of where the platform may lead in the future. Given how old and new companies are moving towards the metaverse, audio, and video. It will be interesting to see how Reddit adapts.
That is good
Ownership is key
nice