Analysts warn that the move is risky. When shares start trading, retail traders who want to invest in a new company buy them instead of bidding in an IPO. Early access to the IPO may reduce demand. Such buyers have no lock-up period and can sell when the stock starts trading, causing price volatility.
"I don't know one company that benefits from allocating shares to their users," stated Launchbay Capital founder Alan Vaksman. Stocktwits.com, which analyzes posts and message volumes relating to a company's ticker symbol, found Reddit retail sentiment "extremely bullish." However, Reddit's "wallstreetbets" community was more split, with some users indicating they would short the stock after trade.
Reddit became a social media staple after its 2005 inception. One of the most recognizable internet emblems is its orange-backed alien logo.
According to co-founder and CEO Steve Huffman, its 100,000 "subreddits" allow discussions on "the sublime to the ridiculous, the trivial to the existential, the comic to the serious."
In his letter, Huffman said he sought support from a subreddit to quit drinking. In 2012, former President Barack Obama had a "AMA" ("ask me anything") (interview) with site visitors.
Though popular in social media, the company has struggled to match the success of Meta Platforms (META.O), Facebook, and Elon Musk's X.
According to Reena Aggarwal, who is the director of the Psaros Center for Financial Markets and Policy at Georgetown University.
In addition to asking, "Where are they going, what are the results looking like, and what changes are they going to make," "The real news is going to be after the first earnings call," she explained to reporters.
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