Reddit Is Letting Power Users In on Its IPO. Not Everyone’s Buying

Reddit is offering its users a chance to buy a piece of the company before its impending debut on the stock market. They’re not all racing to sign up.

In public Reddit forums, private chat rooms, and interviews with WIRED, several moderators and power users—who on Thursday learned they would get the rare chance to buy IPO shares at the same price as institutional investors—say they have little interest in sinking money into the company. Although the opportunity is being extended to those who’ve already invested time in Reddit, such as longtime commenters and volunteer moderators who’ve put in countless unpaid hours, even these users are skeptical about the company’s prospects. The nearly 19-year-old business has never made a profit and lost $91 million last year.

“Reddit has a very rocky history,” says Alex Cook, a volunteer moderator (or “mod” in the community’s lingo) for several gaming subreddits. “I see it as a very risky investment at best.”

Other users disparaged the offer in private chat rooms for mods. “Reddit already fucks us over enough, now they want us to pay for it as well,” one wrote. Another joked: “They’re using my data and work on reddit to sell me back to me through an IPO!!! Look Ma, I’m gonna be rich!!!!”

The cold response from some Reddit users could undermine a long-held ambition of Reddit CEO and cofounder Steve Huffman, who has said he’d like to see contributors to the unique community become owners. It also could temper prices when the RDDT ticker debuts on the New York Stock Exchange as soon as next month, generating less cash for Reddit and the investors who have put in $1.2 billion over the past decade. (Advance Publications, the parent company of WIRED owner Condé Nast, is Reddit’s largest shareholder.)

Reddit has more than 73 million daily users, so some may be more open to investing—or may change their views in the coming weeks. “Honestly they have been gunning hard for every ad dollar they can get,” Reddit user Noor Al wrote on the platform. “Whatever happens, I’m just very excited to be coming along for the ride.” But the initial skeptical reactions from some highlight the volatile relationship between the company and its users who, although attached to the online communities that the social platform hosts, sometimes disdain its decisions on policing content, generating revenue, and launching new features.

Some users are still angry over the company’s decision last year to begin charging for access to its API, an interface used by software developers to draw on user posts and other Reddit content. The fees led to several popular independent Reddit mobile apps shutting down, and protesting users temporarily closed some forums on the service for weeks in a failed effort to pressure the company into reversing course.

IPO shares won’t soothe lingering frustration, says a user who goes by Rat and volunteers as a mod for the r/StardewValley video game community. “I guess this could be their attempt at the ‘pizza party,’” Rat says, referring to a conciliatory gesture commonly offered to children.

Reddit didn’t immediately respond to a request for comment for this story.

Reddit’s investment offer to users is known as the Directed Share Program. “Because you have helped make Reddit what it is today, you now have the opportunity to become Reddit owners at the same price as institutional investors,” the company wrote to the first batch of invitees, both in emails and direct messages through Reddit.

The program allows users to buy shares the day before shares in the company begin trading, at a price to be set by Reddit’s bankers. If the start of public trading attracts a frenzy of interest, shares bought on the eve of trading can immediately rocket in value. Users won’t face any restrictions on selling the shares.

Such IPO buy-ins are typically reserved mostly for huge investors, such as retirement funds and ETF issuers, that tend to hold shares for a long time. Involving individual investors in an IPO can lead to unpredictable swings in pricing, since individuals may sell their shares sooner.

Companies such as Facebook and Robinhood suffered share price shocks after giving individuals an unusually high number of shares—about a quarter to a third of those in the IPO. Airbnb, which set aside about 7 percent of its IPO shares for hosts on the housing rentals marketplace, faced fewer issues.

Reddit hasn’t announced how many shares it will allocate users, but it will be a limited number. First dibs go to significant contributors as measured by joining company advisory boards or having high karma, a secretly determined grade of someone’s behavior on Reddit. The first tier also includes some of the busiest moderators, who create discussion forums and enforce the rules for contributing to them.

Additional waves of users with successively lower levels of contributions will be invited in the coming days. Everyone has until March 5 to register their interest in buying shares, but nobody is obligated to follow through with a purchase. Starting March 1, any user can try to sign up regardless of activity or moderating history, though some may end up on a waitlist.

To be eligible for the program, users must be at least 18 years old and must reside in the US. These restrictions left some teenaged mods, and those located in several other countries, feeling miffed. “Redditors based outside of the US are an equally important part of making Reddit what it is today,” the company wrote in FAQs on its website, citing unspecified regulations for the geographic limitation. “Unfortunately, this one is out of our hands.”

Cook, the gaming mod, who is based in the UK, says international availability of the shares wouldn’t have persuaded him to buy in—but adds that Reddit’s inability to find a workaround or strive for fairness “doesn’t instill confidence.”

Former Reddit employees who had been involved in IPO preparations say resentment from overseas moderators had long been identified as a pitfall of the plan. Staff also told executives they think many moderators would fear buying in, worrying it would taint their volunteer work or invite the wrath of their community members for appearing to sell out. But Cook framed it differently: He said stock simply isn’t the payoff volunteers are after. “A moderator’s ‘reward’ is making the community they’re in better for everyone,” he says.

Other user complaints about the IPO program take aim at its design. Some moderators not yet invited to buy shares have complained that their significant contributions to the vibes of a community aren’t reflected in Reddit’s official measures, because they happen off the platform in private chats. Meanwhile, another group of users criticize the offer for not being exclusive enough: Beside any user eventually being able to sign up, other people who can get in at the premarket price include Reddit employees’ families and friends, and some clients of investing services such as Robinhood, SoFi, and Fidelity.

Matthew Kennedy, senior strategist at Renaissance Capital, a provider of pre-IPO research and an IPO-focused ETF, says widespread rejection of the offer by users could be significant. “I don't believe vocal users would necessarily be representative of everyone who is offered shares at the IPO price,” he says. “But if Reddit couldn't even get regular users to put in on the deal at the IPO price … that would not be a good sign!”

The IPO offer isn’t the first time Reddit has suggested users become financial stakeholders. In 2014, Reddit investor and (now) OpenAI CEO Sam Altman announced a plan to gift to users 10 percent of the shares he and other financiers received that year, when they put $50 million into the company. It couldn’t be determined what came of the idea, known as Reddit Notes, as company communications about the plan fizzled out.

Users who don’t buy in early could still become shareholders through traditional purchases after Reddit goes public. Investors on one of its own forums, the 15-million-member r/WallStreetBets, rallied behind shares of struggling companies like GameStop and drove them briefly onto the Fortune 500 in 2021. The former employees say Reddit has discussed how to tamp down similar activity with its own shares as well as any protests on the service in its first days of public trading. In the wake of the IPO news, Reddit users on r/WallStreetBets and similar forums are already talking about buying put options on Reddit shares, a type of investment that bets a company’s share price will tumble.

Updated 2-23-2024, 6:45 pm EST: This article was updated with the name of Reddit user Noor Al and comment from Matthew Kennedy.