Hacker News Reader

Comment by davidw | Hacker News Reader

What's everyone's take on that IPO and the shares for reddit users?

Buying shares at the IPO hoping for an immediate profit means that you are betting that the underwriter has underpriced the shares. That seems unlikely.

That’s common practice. Most of the time, the shares are sold before the IPO to financial institutions at the list price to guarantee a certain volume of sale and liquidity for the IPOing company. Those institutions expect a first day pop, so it’s common for the list price to be below the expected market price. It also looks better for the company if the stock goes up on day one. None of that maximizes cash to the company, but there are other considerations (and actors) in play.

Everyone’s take? My inexpert opinion is that current stakeholders want their exit and the IPO isn’t for the users to really buy or promote. Reddit has enough mainstream recognition for casual investors who don’t use Reddit to try and make some money on the fresh IPO. But then it just becomes a tulip as reality sets in. There’s definitely a chance to make money in greater fool scenarios but also much greater risk.

But I’m just a guy making noise. Maybe it’ll rocket to the moon and you can fire life.

Correct me if I'm wrong, but the bulk of the existing stakeholders are severely limited in what they can sell over the first, what, 3-6 months, beyond the shares that are part of the IPO.

I believe you’re right but my hypothetical is that it won’t have some Robinhoodesque IPO but that it falls in an inevitable but unpredictable short to medium interval. Long enough for me to want more gains if i invest but short enough for me to lose everything because I can’t time it right. Stoachastic if you will. A proper microtubule disassembly that leaves me with my little worthless tubules. Tulipules?

AFIAK, preferred shares (the ones investors buy) typically aren't subject to a lockup once they convert to common stock. They usually don't dump right away since they don't want to tank the market unless the company is actually dogshit and they're pawning it off on a bigger fool.

Honestly? Reddit is a corpse being propped up like in Weekend at Bernie's in a hope to keep the party going long enough for them to dump enough shares on the secondary market.

The founders and bigwigs have cashed out. Ohanian made his fortune and exited years ago, the CEO just made $193m in compensation. Can't be much milk left in the cow.

I really hope that is the case. The site sucks. It's got decent product reviews and porn though. That doesn't make it a good investment to me but we'll see.

Just because we cheer for something to fail like twitter doesn't mean it happens overnight. Even though it should and would be hilarious.

Rumors are they aren't anywhere close to profitability, seeing their SEC filings will be interesting, especially if they disclose who they sell data to...

Enjoy https://www.sec.gov/Archives/edgar/data/1713445/000162828024...

No need for rumours, their S-1 is available. And no, they are not profitable. They spent something like $800M on staff last year, which is insane to me.

It's a pump and dump, the site will just get worse and worse for the user base as they attempt to squeeze whatever cash flow they can from it post IPO.

Reddit understands that its biggest value is as a gigantic pump and dump forum to dump their bags onto.

Smells of desperation more than anything to me.

I plan to short it soon after the IPO

I’ve thought about doing this as a more general IPO strategy on the assumption that there’s going to be a sell-off of employee owned equity.

I’m sure that there’s a way to estimate the number of shares vested by employees and come up with an estimate sell-off volume for day 0-1

Aren’t employees usually restricted on selling for like 6 months?

Well then you should circle that date 6-mo after IPO (or the end of any non-IPO blackout period) as days with mass sell-offs regardless of the stock price

You act like that isn’t cooked into the optimizations of the market. It is, or everyone could follow your get-rich-quick scheme. Go ahead, try us a few time, see how it goes.

But is that actually baked in to the price? (I’m legitimately asking, not being argumentative)

Back when I worked at a big public company where we had options and employee blackout dates, there would almost always be a dip in the stock price when the blackout was lifted

The "baked into the price" also includes the price of options. I would not be surprised to find that the price premium of options dated around the 6 month window would negate the gain from the drop.

They have a legion of mods working for them for free and still aren't profitable. Whatever you may feel about the denizens of WSB, they all see reddit as nothing more than a shorting opportunity.

Once the mods start getting missives about modding policy from whatever new board takes over post IPO, then things will start to disintegrate.

I kinda don’t know what to say. I never thought message boards could be taken this far, but Facebook did it.

It’s a giant phpbb forum going public lol, yeah … I get the short position totally.

Hardly a phpbb forum... those had a working search function!

Normally they'd fall into irrelevance as Digg did, but their last desperate cry is an IPO. Weird times. Either way they're now absolutely hostile towards casual commenters, posters, and viewers. Their data dumps up until maybe 2023 will be valid and interesting only for some limited time.

Easiest IPO that will be shorted as soon as the VCs and other employees can dump their stock on the public markets either dumping a small percentage such as 20% on IPO day or they will do it after the lock up period or both.

Which ever comes first.

It's generous of Reddit to make that offer. The last time I recall having such an opportunity was VALinux back in 1999. However, despite having a 4 letter username and "cake day" in 2008, and regular, solid contributions, I just barely didn't qualify. Karma whores easily do qualify, so that's a bit hard to swallow. But my wife does do a LOT of interaction there and did qualify, so I'm trying to figure out exactly what to do. My thoughts so far:

The big problem is I'm not sure that Reddit, the company, really understands it's business. Though I was expecting the protests of the last year to have gone much further than they did, I think Reddit's response could have been much better, and their response demonstrates their lack of a solid business plan. In particular, the importance of redditors and moderators to their business isn't reflected in their plans (AFAICT).

I think that may end up backfiring.

I feel like their IPO would be better priced closer to a 4.5B valuation rather than the 6.5B they seem to be targeting. There is some potential upside to it, as there might be some justification for a market cap of 10B. But there's a big wildcard in there: the Directed Share Program to redditors have no "cooling off" period, so there's likely going to be some volatility due to "get in, get out". But, the DSP shares have "one vote per share", which might contribute towards people holding them. But that's 8% of offered shares, and offered shares are around 20% of total valuation, so that may be a small enough percentage of shares with high volatility that it won't have a big impact.

The WallStreetBets crowd might have an impact, that will be fun to watch from afar. I'm not expecting anything there, but who knows.

I'm kind of expecting some backlash of the community to the extraction of value by Reddit the company, but I haven't really heard any noises along those lines. I could see their value dropping significantly over the next year because of this. There's a lot of fatigue over the techno-elite extracting value off "the little people's backs". And Lemmy is really well positioned for facilitating a mass exit from Reddit.

The recent news of advertisers making posts that look like regular user posts is, IMHO, leaning in a bad direction. In my mind, that is reminding me of one of the primary things I've seen in Facebook that has dropped my engagement to near-zero levels.

But, there are a lot of other tech companies watching Reddit and hoping for a good IPO leading the way for other similar IPOs. Maybe that will lead interest.

Over all, I'm expecting short term excitement, but longer term rough times for Reddit the company.

But, my investment plans have, in too many situations, been exactly the opposite of the market; I've bought just before the market drops and sold right before it goes up...

Everyone seems to make this mistake that read its core business is social. And that means they sell data.

They’re selling influence. Mostly to kids. To the terminally online. The new Politically Religious.

The standard MO to ban all decent isn’t because the admins/mods actually disagree, it’s that it makes the echo chamber more uniform. They’re culling wrong think to sell things, sure, but more so ideas.

When you consider that “reputation” is a product that politicians, celebrities and companies can just purchase, I think it makes a lot of sense what Reddit can sell.

I'm going to disagree with you that Reddit is selling influence. I think they're selling eyeballs and user-created data. Both of which highly depend on Reddit's reputation with it's users, and that is what I think Reddit is going to have problems with.

Thanks for the quality comment. I basically just buy and hold VTSAX and call it good, rather than worrying about individual companies. I'm mostly just curious if there'll be enough of a 'pop' with the stock to make buying some shares worth it.

That is generally a very good strategy. I have a lot (~50%) of my investments in Target Retirement Plans, though I have put them out about 5 years from my real retirement date, just to keep them a bit more high-return longer since I feel like I can handle that risk.

However, my FIL gave me some great advice 5-6 years ago: Take a little bit, and put it into things you like, to keep investing "fun". In my case I'm doing around 2% in "fun stocks". Personally, it's pretty hard to argue with since my first "fun stock" that I did that with was TSLA, and I got a 20x return on that. My new "fun" set have been other EV and energy stocks, largely, and have generally done quite poorly, a 2-3 of them are down 95+%, but that's over 2 years and my window was more like 5, so time will tell. A handful are up 30-50%. So, some of it depends on your definition of "fun". :-D

Wouldn’t touch it with a 10 foot pole

Reply on news.ycombinator.com