Jeremiah Johnson says has “an embarrassing amount” of Reddit karma. So, as a long-time moderator of subreddits like r/economics, he was part of a select group of power users who were granted the first option to buy shares on Reddit as the company prepares to go public.
“You would never see Instagram doing something like this,” Johnson told TechCrunch. “But on Reddit, much of the content is driven by Redditors and unpaid moderators. If anywhere was going to do it, it would be that one.”
It's unusual for social media companies to give users the same privilege as institutional investors, but Reddit has reserved shares in its IPO to sell to 75,000 devoted community members. Potential investors are prioritized based on their karma amount, which is a metric Reddit uses to measure a user's contribution to the site. Some people accumulate karma after many years of dedication; others can make a post go viral and get rich in karma, which has been pretty useless until now.
When deciding whether or not to buy Reddit's IPO, users aren't just weighing normal investment considerations, like whether Reddit can eventually turn a profit or not. They also wonder if Reddit could be the next meme stock, which could prove lucrative or disastrous.
Communities on Reddit like r/WallStreetBets have left a lasting impact on the stock market, to the point that Reddit formally included the community as a risk factor in its S-1 Filing. With more than 15 million members, r/WallStreetBets coordinated a short squeeze on GameStop shares in 2021, a maverick move that cost hedge funds billions of dollars. Retail traders have also manipulated the prices of underperforming stocks like AMC and Bed Bath & Beyond, calling them “meme stocks.”
Gillian Tahajian, a 24-year-old marketing analyst, thinks getting into a meme stock early could be a blessing.
“I see (Reddit) as a GameStop stock,” he told TechCrunch. “I think there is too large a loyal base that will buy and never sell.”
Tahajian joined Reddit last month, but now he surfs the platform nightly to catch up on reality TV gossip and, once he's caught up on the cast of the drama “Love is Blind,” he examines the personal finance subreddits. Although she wasn't invited to invest early, she plans to buy shares on Reddit once she officially goes public.
However, it's not just the potential of memes that attracts her. Tahajian wants to invest in Reddit because she sees the potential in it as a search engine. she is turning common people to add “Reddit” to the end of their Google searches, as Google has been overrun by low quality results.
“I want to invest in a search engine anyway, because I think it's a good investment,” he said. “Google is overpriced and Pinterest is failing me.”
Redditors are famous for their engagement, but the company's relationship with its most devoted users has been strained over the past year. Reddit alienated many of its communities, known as subreddits, with sweeping API changes, making API access so expensive that some third-party apps had to shut down. In protest of the changes, more than 8,000 subreddits were disabled, leaving parts of the site virtually unusable.
As Reddit goes public, Johnson sees Reddit's offer for users to invest early as an olive branch.
“Reddit really relies on power users moderating the site, and because they've given real power to those power users, the power users literally made the site unusable for a day or two,” Johnson said. “Reddit is just structurally more dependent on its power users than any other social media site, and I think that tells you why they're doing this and why no other social media site would do it.”
Johnson said he plans to take up Reddit's offer to invest early, but is motivated by the ability to chronicle the experience for his Newsletterrather than by potential returns.
Max Spero, a ai/”>start up Twenty-something founder plans to buy Reddit shares after the IPO because he is a fan of the platform, which he has been using for 11 years. One of his favorite Reddit communities is r/breadit, a subreddit dedicated to bread-making, but he is also an avid Magic the Gathering player who spends time on r/magictcg.
“I think Reddit is a really great website; despite the average negative community, it's one of the few places on the Internet where community opinion is so clearly organized and thoughtful discussions take place,” Spero told TechCrunch. “That said, I'm not sure how much Reddit can grow.”
Reddit has a lot of ground to gain to become profitable, but the company said in its initial public offering that it still has the potential to make more money from advertising. Reddit is also license data to Google, which will pay $60 million a year to use its content to train large language models. Although the platform's global daily active users (DAU) increased by 27% in the last quarter alone, it is still surprisingly small at 73.1 million DAU. For comparison, that's less than half that of X (formerly Twitter).
Amit Kukreja, a stock market youtuber Anyone who uses Reddit doesn't have as much hope for Reddit's IPO.
“Inviting people to be investors is fine, but once I found out they included r/WallStreetBets as a risk, I thought it was a 'screw' for the user,” he told TechCrunch. “What would have been really cool is if they had given users free shares – Sam Altman or one of the major venture capitalists could have cashed out even 0.2% of their shares (for users).”
When it comes to stocks, Reddit might be the biggest meme yet. For people like Kukreja, who does not plan to invest in the IPO, the threat of volatile stock shenanigans is a deterrent. But Johnson sees Reddit's stock purchase as a “rational prediction of irrationality.”
“Regardless of whether this makes sense technically or not, if this is something that's going to happen, they better get in,” he said. “This could be the next meme stock.”
