Being a Reddit user has always had its perks, but now the most loyal Redditors will get VIP passes to own part of the company. Reddit disclosed plans to launch its long-awaited IPO at up to a $US6.4 billion valuation, according to a Monday filing with the SEC, and the company is reserving 8% of its shares for longtime members of the online platform.
“Our users have a deep sense of ownership over the communities they create on Reddit,” said the company in the filing. “We want this sense of ownership to be reflected in real ownership – for our users to be our owners.”
To be clear, you still have to buy stock in the company, but you may have special privileges. Reddit plans to sell 22 million shares of the company for between $US31 and $US34 apiece. It’s one of the most highly anticipated social media IPOs since Pinterest went public in 2019. Reddit’s IPO has generated lots of hype because it’s one of the largest online platforms in the world, with over a billion monthly active users. It’s likely to go public sometime next week, according to Axios.
There are nearly 1.8 million shares reserved for Reddit users and moderators who created an account before Jan. 1, 2024. To qualify, you must be a United States resident and over the age of 18. Redditors will then be ranked into six tiers based on their moderator actions and karma score, which measures community contributions; the higher your score, the more priority you get on the day of Reddit’s IPO. Reddit will notify you if you qualify for a tier.
Tier 1 will be “meaningful contributors” to Reddit’s community programs. Tier 2 is users with over 200,000 karma and mods with over 5,000 moderator actions. Tier 3 will be users with over 1,000 karma and mods with over 2,500 actions. The cutoff for Tier 4 is 50,000 karma and mods with 1,000 actions, and Tier 5 is 25,000 karma and mods with 500 actions. Tier 6 is every other eligible Reddit user, but there may not be shares left over at that point.
One special privilege available to Reddit users, and no one else, is that you can sell your stock on the day of Reddit’s IPO. Other shareholders will have to hold onto their shares for the day, but this group of loyal Redditors won’t be subject to the “lockup” agreement. There’s already been speculation that Reddit’s stock could fluctuate wildly, and the company even called out that it could become a meme stock.
Reddit listed r/WallStreetBets as a risk factor in a previous IPO filing, noting that this subreddit could cause “extreme volatility for reasons unrelated to our fundamental business.” Now this community of untraditional investors will get a chance to own part of their platform.
So how will Reddit make money as a public company? The company lists advertising, AI licensing, and its user economy as its three main avenues to generate returns for investors. Reddit recently signed a $US60 million deal to let Google scrape its online communities for content, and it appears there’s more of that to come.
Reddit’s IPO is bound to be a wild ride, and shares will likely sell quickly due to the massive interest around the company. If you’re interested in getting your piece of the company, you should make sure to be ready on the day of the IPO.