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Reddit IPO Faces Turmoil as WallStreetBets Community Casts Doubts


Leo Gonzalez

March 4, 2024 - 20:54 pm


Reddit's IPO Faces Skepticism from Its Own WallStreetBets Community

(Bloomberg) -- Reputed for rallying behind underdog stocks shunned by Wall Street, Reddit Inc's stock-trading enthusiasts from WallStreetBets are poised to challenge the narrative with the company's upcoming initial public offering (IPO). In a surprising twist, a substantial number of the forum’s 15 million users have expressed skepticism regarding Reddit's IPO, casting doubts over its potential success.

After Reddit announced its intention to go public, a whirlwind of activity swept through WallStreetBets, the platform that garnered widespread attention for fuelling interest in meme stocks like GameStop Corp. A particular post advocating short-selling Reddit stock gained traction within the community, marking a stark contrast to their traditionally bullish stance. Discussions ranged from dissatisfaction with Reddit’s profitability to fears of increased moderation, with much of the sentiment rooted in spite.

The potential IPO, which eyes a valuation of up to $6.5 billion, faces undesired attention from one of its most vibrant and visible user groups—a factor the company highlights as pivotal in its SEC filings and identity.

A Community Divided

Lukas Muehlbauer, research analyst at IPOX Schuster LLC, conveyed via a phone interview that the responses to the IPO within WallStreetBets were overwhelmingly negative, with high-ranking comments criticizing the company's revenue streams and forecasting excessive censorship. "The community is sizable, and as evidenced by meme stock phenomena like GameStop and AMC Entertainment Holdings Inc., its impact can be consequential," Muehlbauer stated. He also added, "Should the stock pop, it wouldn't be attributable to WallStreetBets."

Historically, Reddit's involvement in market stories heralded the arrival of enthusiasts instead of detractors. WallStreetBets became a household name, birthed books and a Hollywood-worthy narrative, by taking aim at short sellers they believed were targeting fundamentally sound companies for profit.

The backlash against Reddit's imminent IPO is not widespread across the entire platform but is particularly pronounced on the WallStreetBets forum. While a controversial post regarding Reddit’s valuation fetched around 2,200 upvotes and over 600 mostly critical comments, another unrelated and satirical post about modest investment returns attracted nearly 4,000 upvotes, indicating a divided community.

Varied Opinions Across Reddit

In stark contrast to the singular WallStreetBets perspective, opinions varied across different subreddits. Contributors to the Investing subreddit displayed a mix of apprehension and intrigue at the prospect of acquiring stock during the IPO. A few users disclosed plans to leverage the traditional "IPO hype," and others were merely curious to see how the IPO would unfold.

The negative stance prevalent on WallStreetBets stemmed from issues such as the reliance on volunteer moderators, the capacity for employees to liquidate some stock as part of the IPO, and skepticism surrounding the company’s aspirations in artificial intelligence. Users encouraged others to short Reddit's stock or to procure put options—financial instruments that profit from a decrease in stock value—once they’re available.

One user, under the handle 96Phoenix, humorously suggested that Reddit's stock would diminish faster than their finances post payday, garnering over 300 upvotes.

User Influence on Corporate Strategy

Reddit's user base has historically played an active role in influencing the platform's direction. During the previous summer, several popular subreddits were temporarily made inaccessible by moderators to protest Reddit’s decision to hike the prices charged to third-party developers for accessing its API (Application Programming Interface). This instance of user influence was significant enough to be listed among the risk factors in Reddit’s IPO filings.

Another point of contention noted by users was the minimal mention of WallStreetBets—just a few instances within more than fifty pages of risk factors.

In response to Bloomberg's inquiries, Reddit chose not to comment on this emerging issue within their community.

The Specter of Becoming Another Meme Stock

The grumble from WallStreetBets stands in contrast to the sentiment disseminated by Reddit co-founder and CEO Steven Huffman. In a letter within the filing, Huffman underscored the concept of users possessing "real ownership" of the platform, extolling the passion they exhibit for their communities, their aspirations for the company, and their dissatisfaction when it falls short of their expectations.

There is tacit acknowledgment by Reddit of the potential ramifications of the backlash from its user base turning the company into another meme stock debacle, reminiscent of the 2021 frenzy. The filing plainly warned investors that they faced the possibility of losing their investment if unable to offload shares at or above the IPO price.

Reddit aims to sidestep the fate that befell Robinhood Markets Inc., another company favored by retail traders. Robinhood's IPO shares initially surged but later plummeted, nearly 70% below the offer price within just six months post-IPO.

A Critical Observation Period for Reddit's IPA

All eyes will be on the early trading phase post-IPO. Muehlbauer of IPOX Schuster mentioned, "There has been talk in the community about potentially pumping it in the beginning and then buying puts." He underlined the decentralized nature of WallStreetBets, suggesting that the direction of Reddit's IPO would largely hinge on the activity observed in the opening days.

With the IPO perhaps imminent, the question remains whether Reddit can leverage the same community that once championed undervalued companies against Wall Street skepticism for its benefit, or if it will face the collective might of a user base that feels disaffected by its corporate maneuvers.

Additional Information

For those interested in delving deeper into Reddit's IPO trajectory and the stance taken by the WallStreetBets community, a comprehensive view of the public response can be found within the SEC filings and the lively discussions prevalent across the various subreddits. Explore further by reading the detailed analysis of this unexpected twist in the ongoing narrative of Reddit's corporate journey through these sources:

  • Reddit’s Chief Risk Is Reliance on Unpredictable Users: Link to Article
  • Reddit Revolt Previews Social Media’s Future in the AI Era: Link to Article

In staying informed and preparing for the potential outcomes of Reddit’s IPO, interested readers and investors alike can gain insight from these discussions and expert opinions.


In summary, Reddit Inc. approaches its IPO amidst a cloud of uncertainty fueled by the very community that has propelled it to global recognition. While the WallStreetBets forum has sparked intense debate and notable disapproval, the platform as a whole presents a spectrum of views, ranging from critical to speculative interest. The world is watching to see if Reddit can navigate the turbulent waters of public opinion and emerge as a success story or fall victim to the capricious winds of market sentiment. As with any market event, the initial days following the opening bell will be defining for the future of Reddit.

The content reflects the scenario as of 2024 and has been developed based on the sources and information provided.