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Reddit told the world to “watch out for the monkey” in its IPO documents, albeit in less explicit terms. Simply put, the company warned potential investors that one of its subreddits, the infamous r/WallStreetBets, could cause the company’s stock price and trading volume to be extremely volatile, and He warned that there was little Reddit could do about it.
Reddit cited r/WallStreetBets as one of the potential risks of investing in the company. Thursday’s S-1 form, referring to the subreddit’s role in the 2021 meme stock boom, in which retail investors banded together to drive up the prices of struggling companies like GameStop and AMC. At the time, the purpose of r/WallStreetBets was to trick professional Wall Street investors into losing money by betting on certain companies.
There’s a good chance that the average person on r/WallStreetBets, a subreddit of 15 million retail investors who call themselves “monkeys” and “degenerates,” and other online forums will do the same with Reddit stocks. The company said it could be.
Reddit wrote:
Given Reddit’s widespread visibility and brand recognition, including the popularity of r/wallstreetbets among retail investors and direct access by retail investors to a widely available trading platform, the market for our Class A common stock Prices and trading volumes may experience extreme volatility for reasons unrelated to our underlying business, macroeconomic or industry fundamentals.
The company explained that if people are unable to sell their shares at or above the IPO price, they could lose all or part of their investment due to volatility. The long-term effects of movements like the one promoted by r/WallStreetBets have already been documented, and it’s worth noting that increased interest and large investments do not necessarily lead to success for companies over time. about it.
During the 2021 meme stock boom, GameStop’s price rose from less than $5 in early January to The highest price reached $350 in a few days., only to plummet again a few days later. Almost all of GameStop’s gains have evaporated three years later, with the company’s stock valued at $13.36 as of Thursday’s close. The same goes for AMC, which started the year at less than $10 in 2021 and hit a year-to-date high of $70. AMC stock is currently valued at $4.42.
Reddit has already announced plans to allow its most loyal users and moderators to buy stock in the IPO. abnormal movement, IPO shares are typically reserved for professionals and wealthy investors in designated stock programs, meaning people on r/WallStreetBets may be among the first to invest in the company. Additionally, shares purchased by users and moderators are confinein the post-IPO period, insiders and early investors are prohibited from selling their shares to prevent the price from falling.
The company has not yet revealed how many shares are set aside for users, only saying that eligibility will be based on users’ contributions to Reddit. According to the IPO filing, Reddit will measure moderator contributions “by membership and moderator actions on the platform,” and user contributions based on the user’s karma amount.
As for the people at r/WallStreetBets, many seem to agree with the company’s warnings about their influence.of Top posts in subreddit On Friday morning, “Reddit lists WSB as a risk factor for IPO 😏” This article had thousands of comments at the time of publication. Comments suggesting shorting the stock had thousands of upvotes, while others warned that Reddit would permanently ban the subreddit if it messed with the stock.
One user said: “This could be crazy.” Said.
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