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Beware the Apes, Reddit told the world in its IPO documents, though not in such clear terms. Simply put, the company warned potential investors that one of its subreddits, the infamous r/WallStreetBets, could make its stock price and volume extremely volatile — and there was little Reddit could do about it.
Reddit lists r/WallStreetBets as one of the potential risks of investing in the company S-1 form on Thursday, referencing the subreddit’s role in the meme stock craze of 2021, where retail investors banded together to drive up the price of struggling companies like GameStop and AMC. The goal of r/WallStreetBets at the time was to crack down on professional investors on Wall Street and prevent them from losing money betting against certain companies.
It’s entirely possible, the company said, that everyday people on r/WallStreetBets, a subset of the 15 million retail investors who refer to themselves as “apes” and “degenerates” and on other online forums, are using Reddit. You can do the same thing with stocks also.
Reddit writes:
Given Reddit’s widespread awareness 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 price and trading volume of our Class A common stock. We may experience extreme volatility due to reasons unrelated to our underlying business or macroeconomic or industry fundamentals.
The company said that due to the volatility, people may lose all or part of their investment if they are unable to sell their shares at or above the IPO price. The long-term impact of the movements inspired by r/WallStreetBets has already been documented, concluding that increased interest and heavy investment do not necessarily lead to companies’ success over time.
During the meme stock boom of 2021, GameStop’s price rose from less than $5 in early January to a A high of $350 in a few days, only to nosedive again a few days later. Nearly all of the gains on GameStop’s stock have vanished three years later, with the company trading at $13.36 on Thursday. The same can be said for AMC, which reached a high of $70 in 2021 after starting the year at less than $10. Today, AMC shares are worth $4.42.
Reddit has already announced that it plans to allow its most loyal users and moderators to buy stock in its IPO. unusual gait, because stock in an IPO is typically reserved for professional and wealthy investors – in a directed share program, meaning there’s a possibility that the people of r/WallStreetBets could be the first to invest in the company. Furthermore, Shares purchased by Users and Moderators will not be subject to lock upThe period after an IPO, where insiders and early investors are restricted from selling their stocks to prevent the price from going down.
The company has not yet revealed how many shares are reserved for its users, only stating that eligibility will be based on the user’s contributions to Reddit. Reddit will measure moderator contributions “by subscriptions and moderator actions on our platform,” according to the IPO filing, and user contributions by the volume of their deeds.
As for the folks at r/WallStreetBets, many seemed to agree with the company’s warning on its impact. Top posts on subreddit This article had thousands of comments by the time it was published Friday morning – “Reddit lists WSB as a risk factor for its IPO 😏” – this article had thousands of comments by the time it was published. Comments that suggested shorting the stock had thousands of upvotes, while others warned that the subreddit would be banned if Reddit messed with its stock price.
“This could be pretty wild,” one user said. Said,
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