REDDIT IPO - What's The Verdict?

As some of you may know, Reddit will IPO tomorrow with ticker $RDDT. The company is seeking a $6.4 Billion Dollar Valuation. The IPO is reportedly 4-5x oversubscribed, some retail investors were offered access to the presale via banks like SOFI.

So, what is Reddit?

People use Reddit for a lot of different things. I myself find myself adding “+ Reddit” to >50% of my Google searches. It is a patchwork quilt of community forums, with what was, for a long time, a self-moderating community of “Sub-Reddits.”

Some people use Reddit for some of the same reasons people use all other forms of social media: to celebrate, condemn, defend, or mock causes, celebrities, and events, etc.

But

Many people, especially in the Millennial and Gen Z Generations, have gleaned a lot from Reddit.

I’ve seen kids getting help with homework on Reddit. I’ve seen celebrities such as David Lynch do “AMAs” or “Ask Me Anything” sessions (essentially asynchronous interviews - anybody can pose a question in these sessions, and you may just get picked.) On the other hand, I have seen subreddits pointing people to the latest movie pirating website, travel advice for people looking to avoid extradition, etc. Reddit was, for a long time, like pirate radio. It has since been cleaned up, with many inactive, illegal, and/or “NSFW” Subreddits now closed.

In the past 5 years, and especially in the past 3 years, I’ve seen Reddit taken more seriously as a target market/audience. I remember sitting in an SEO class taught by an upstart hotshot from SEER in senior year of undergrad who indicated that Reddit SEO was all the rage, and that marketing firms were all racing to “crack Reddit.”

You see, the thing is, Reddit is data-laden. Further, when you consider a company like Uber, that recently broke even via ad-revenue after years of being unprofitable, and then consider that Reddit has already started selling ads, and recently closed a deal with Google to sell data for AI-model training, I see a lot of potential here.

Stats:

~70 Million Daily Active Users

~400 Million Monthly Active Users

Think of Reddit as that confessional box where you can post anything you need to vent about, or that doctor that you can bring you weird rash to. Anonymous to the extent you wish, and best of all, free (as of now).

And so, when people talk valuation, and revenue, it’s no surprise we’re in the billions; despite Reddit posting a net loss of $90 million last year, and similar, if not worse performance in the past two decades, I could see the following senario playing out: Cash-flush OpenAI pays Reddit for exclusive access to all posts from years x-z for training, at a premium, and Reddit takes said years of posts offline forever.

We did some sentiment analysis, just to get an idea of what’s out there discourse-wise:

First, we went to Reddit itself - mainly R/Fidelity and R/Wallstreetbets:

Next, we looked at news headlines:

Then we pulled some news articles from the web:

All in all, they’re selling ~22 million shares at ~$31-35 per share. Further, 8% of their pre-listing friends and family offering has been offered to actual Subreddit Administrators and Moderators themselves. To qualify, you had to have accrued a certain amount of “Karma” by a certain date in the past few months. Think of Karma like stardust you accrue by upvoting or commenting on a post, answering a survey, etc. All around, you earn Karma by being a good redditor. I doubt that those in this demographic who bought pre-IPO shares will sell anytime soon.

If this dumps to the $10s/share in coming weeks I will plan to accumulate and hold, as I believe Reddit is a prime target for eventual acquisition by players in the AI space.

Leave a comment below or reach out to us on Twitter if you have any thoughts about Tuesday’s IPO.