Reddit cites r/WallStreetBets as a risk factor in its IPO filing

L4sBot@lemmy.worldmod to Technology@lemmy.world – 319 points – Reddit cites r/WallStreetBets as a risk factor in its IPO filing | TechCrunch
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Reddit cites r/WallStreetBets as a risk factor in its IPO filing::As Reddit finally files to go public, the company wrote in its S-1 filing that "meme stock" schemes on r/WallStreetBets could pose a risk to investors.

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Reddit has never been profitable so I’d say that’s the biggest risk.

Wall Street doesn't care about profitability, they only care about growth.

They should be worried about how much of their 'growth' is bots.

They care now that interest rates have increased. That’s kinda what the whole “enshitification” and layoffs are all about. Tech companies desperately scrambling to make a profit.

Profitability is beginning to matter more. 5.25% Federal Funds rate, and a Prime-Rate of like 8.5%, means that it costs 8.5% for businesses to borrow money now.

So that means that if a business borrows at 8.5%, they must grow by 8.5% to just stay even with interest rates and the cost of borrowing money. Because a lot of these "growth" strategies involve losing money for years-and-years, you have to factor in the costs of those losses as well.

When Federal Funds Rate was 0.25%, no one cared about the cost of money or the cost of loans. Today, Wall Street cares, and you can see it in all the stock movements. The less-profitable companies have been getting hammered.

Nope that was true when interest rates were low.

Now they care about the bottom line.

It can change again.

It's only not profitable because the CEO and CFO are taking such massive salaries, $193M and $93M, respectively.

They took $286M and the company lost $90M. They could take $90M less - still taking almost $200M - and Reddit would be profitable. That alone should tell investors that this is a bad investment.

That's not exactly correct. The CEO & CFO are paid a salary way less, like I think around the $300k range. The $285M is in stock options, which only has a value based on the price of the stock. They could hand them back to the company but they would be of no value to the company until the IPO.

I'm confused how they could be paid in stock options when they aren't traded. Do they just use made up numbers until this point and get "paid" in exposurebucks?

Even if a stock isn't publicly traded it still has value. It's just that retail investors can't buy or sell it. Basically, it's owning a part of the company. So they now technically own whatever percentage (number of shares/total number shares available). Unfortunately, it doesn't equate to a monetary value to the company itself just show's the company who owns what percentage of it.

So well the company is "valued" at what it is now, they are only saying that if they were to sell all those shares in the open market that would be what it's worth. Now in the business world the CEO & CFO will be able to go get loans based on that value (putting that stock as colaterial) but it's basically all that they'd be able to get right now.

Basically, yes. It's like paper money the company can print more of and dilute the value of.

Plus $800k in performance based bonuses.

Right, but that's nowhere near the money to be able to make the company break even.

In risk management terms, lack of profit isn’t a risk. That’s more so an outcome.

Let the censorship and banning waves intensify, watch as the porn is purged. Ogle as the platform slides slowly into irrelevance.

All the ingredients are there. All we need is a bit of competition from other platforms and Reddit can join the club with all the other dead platforms like myspace, digg and tumblr.

As mastodon is beginning to seriously compete with Xitter, maybe Lemmy can also contribute to the downfall of Reddit.

Here's a serious question: should we be bracing for a massive influx of stock bros after reddit inevitably find some pretext to shut down wallstreetbets?

We should be embracing them. A lot of financial experts is good to have against the fight against ghoulish institutions in Wall St.

great, now they're going to ban WSB and they're going to take over lemmy...
#chickentendies

No they’re going to short their own IPO into the ground and blame wsb

No.

Wsb is their golden goose. They gave them NFT s for a reason

They have been purging subreddits for years that are not advertiser friendly, usually after they get media attention. Really no reason to expect them to stop the purges. There is a reason I am here and not there, and that is just one of them.

lmao imagine the shitstorm if they ban WSB

Does people trying to short you make your stock less valuable? Maybe because potential investors can see the sentiment?

Shorting a stock in effect means selling a stock you don’t own. The stock market derives price based on supply and demand. When more people are selling than people are buying, the stock price goes down. There are many more dynamics at play than this though. Often there are investment firms which will identify a price mismatch and attempt to price out the short sellers by buying and pushing the price up. This can trigger a short squeeze which makes the price suddenly pop.

IPOs are exciting times to be a trader, but individuals are largely in for the ride. They can’t move the market. If they identify one of these larger plays they can join the fun. Game Stop was one of the first examples of a consumer-driven play, and it scared the shit out of institutions because it upended their risk models.

A Short Sale position is actually a risk and if people know you're doing it they will ride you to the bank by buying up as many shares as they can and force you to pay them when your deadline to repay the borrowed shares comes up.

WSB might be the butt of a lot of jokes but they have (in the past at least) analysts and insights that rival top investment firms, not reflecting of the average participants performance. A much more logical decision would be to inflate the price at launch and then when it reaches a critical state ride it (short sell) into the ground as it panic sells into penny stocks.

I mean, it’s true. WSB has been under scrutiny and introduces the risk of litigation or legal action towards Reddit. That could hurt stock prices. It’s all pretty routine to disclose potential risks in IPO documents or regular annual shareholder documents.

🦍 🦍 💪 🤲

Lol, WSB hates the apes. They like to actually make money, instead of incinerating it on companies going through obvious death spirals.