Remember the whole Wall Street Bets craze from 2021, which sent GameStop stock and AMC stock to the moon? For better or for worse, the message-board platform that enabled this behavior is preparing to launch an IPO, so you’ll have a chance to buy shares soon.
It was front-page news when Reddit users contrived to squeeze the short sellers out of their positions in GameStop and AMC stock. For a while, it felt as if small retail investors were finally getting their revenge against well-heeled short sellers.
Unfortunately for many retail stock traders who jumped on the short-squeeze bandwagon at the wrong time, GameStop and AMC stock crashed after they took their moon shots. Nevertheless, some traders continue to speculate about which stock might be the next one to get the Reddit short-squeeze treatment.
There’s a new wrinkle to this story, though, as Reddit itself is about to go public. Reddit filed for an IPO in 2021, at the height of the Wall Street Bets phenomenon, and is widely expected to trade on the New York Stock Exchange under the ticker symbol RDDT next month.
Reportedly, 75,000 of Reddit’s biggest users will get access to the stock at its issue price. Reddit CEO Steve Huffman proclaimed, “I want our users to be shareholders, and I want our shareholders to be users.”
Courtesy: @channelchek
Of course, the vast majority of Reddit’s shareholders won’t be users, and vice versa. Apparently, some “Redittors” are skeptical of the IPO and have expressed concerns that going public will ruin the company and its social-media platform.
Most of Reddit’s early shareholders won’t be concerned about the integrity of the platform. They’ll be in it to make a quick buck, though there are certainly no guarantees that Reddit stock will soar like GameStop and AMC stock did.
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Even Reddit’s management had to acknowledge the prospect of “extreme” post-IPO share-price volatility. In a filing, Reddit observed that the wild swings in GameStop and AMC stock were “in part, to strong and atypical retail-investor interest, including as may be expressed on financial-trading and other social-media sites and online forums such as r/ wallstreetbets, one of our subreddits.”
Wouldn’t it be ironic, then, if Reddit users caused the downfall of Reddit stock? An event such as this, Reddit’s management admits, “could cause you to lose all or part of your investment if you are unable to sell your shares at or above the initial offering price.”
Courtesy: @TechnoSports_in
On the other hand, Reddit has a growing community of around 70 million users per day, on average. Maybe, after an initial period of share-price volatility, Reddit stock will achieve price discovery and grow over the long term.
That’s a big “maybe” and caution is definitely advised. This isn’t 2021, and IPO fever is old news now. Besides, there’s no shortage of competition in the social-media space.
But then, Reddit doesn’t seem to compete directly with Facebook and X/Twitter, which are geared toward the general public. Reddit, in contrast, is more like a closed society of social-media-savvy technophiles.
Personally, I plan to watch from the wings and comment from a safe distance when Reddit goes public. Judging from the pops and drops of GameStop and AMC stock, I’ll probably regret it if I place a hasty trade with Reddit.
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