Reddit seeking a possible 2022 IPO: Reuters
Yahoo Finance’s Ines Ferre breaks down reactions to a possible Reddit IPO.
AKIKO FUJITA: Reddit, the platform for online messaging boards and, of course, the home of Wall Street Bets, looking to potentially go public. Reuters reporting that the company has hired investment bankers and lawyers for a potential IPO. Yahoo Finance’s Ines Ferre is watching that story for us.
Ines, I guess it makes sense. We’ve talked so much about the mean trade. So much of that conversation started on Reddit. The company trying to take advantage of that, perhaps.
INES FERRE: That’s right. Starting on Reddit’s forum Wall Street Bets really became a household name after that GameStop frenzy that we saw earlier this year, and this IPO could happen early next year. And according to the Reuters report, the company would be looking for a valuation of some $15 billion in its most recent private funding. The valuation came out at $10 billion. So that would be a 50% bump up from that valuation.
And if the company goes public, this would help or this would benefit venture capitalists like Peter Thiel. Also, Tencent is an investor, as well, as even Snoop Dogg is an investor in this company. But I also look through many of the comments because there is a thread today of this possibility of an IPO for Reddit. And on Wall Street Bets, a lot of the comments from users have to do with advertising.
Much of the revenue which Reddit receives is through advertising. In fact, in the second quarter, advertising came in at $100 million in revenue for the company, and that’s almost three times as much than the same quarter as last year. Now, the company does offer a premium subscription, where that is ad free, and some Wall Street Bets users have that premium subscription.
But many of the comments that you saw were concerns that this would become more advertising heavy, that the site would have more ads. In fact, one user saying, look, I don’t use Twitter. I don’t use Facebook. Facebook is for grampas. And in this case, if they do come try to monetize themselves even more so with more ads, then he’s going to be a very angry user. So certainly, the advertising angle is the one that many of these Wall Street Bets users in the forum are concerned about.
AKIKO FUJITA: Yeah, the retail take on some of these more consumer-facing brands that have gone public, it’s been so fascinating to watch. But, of course, if you look at a name like Robinhood, they haven’t necessarily performed well since coming to the market. What have you heard from some analysts? What’s the Wall Street take on Reddit?
INES FERRE: I spoke to Matt Maley from Miller Tabak today on the Phone. And he was saying, look, the timing of this IPO is– of course, is going to be very important because if the timing is wrong, then that valuation could be lower. Also, he said, if there’s a correction in the markets between now and when they go public, then people will be looking for a scapegoat, and Reddit could have a target on its back.
He was more concerned about transparency on the platform. So if regulators were to push for more transparency for users, for example, to reveal themselves, to make sure that there are no pump-and-dump schemes on there– there’s been concerns of pump and dump. There’s been concerns of bots scraping through Wall Street Bets through the comments and, also, of even hedge funds percolating in there.
So what he– his concern was if regulators want to create more transparency, then this could be a headwind for Reddit. And it’s interesting because this issue of revealing identities was something that Steve Huffman, co-founder and CEO of Reddit, had talked about during the congressional hearings earlier this year in February and something that he defended, saying Wall Street Bets would not exist if users had to reveal their identities because they’re talking about gains and losses.
And so it’s actually advantageous for them not to have to reveal their identities. But this is something that Matt Maley was saying could be a concern. And I also DMed with a Reddit user who also said to me that if the company goes public then the content that they post would certainly be more scrutinized.
AKIKO FUJITA: The IPO market already the busiest this year since 2000. We’re going to be watching the last several months very closely. Reddit could be a big one there. Ines Ferre, thanks so much for that.