IPO shares won’t ease lingering frustration, says a user called Rat who volunteers as a mod for the video game community r/StardewValley. “I guess this could be their attempt at ‘pizza night,'” Rat says, referring to a conciliatory gesture commonly offered to children.
Reddit did not immediately respond to a request for comment for this story.
Unwanted offer
Reddit’s investment offering to users is known as the Directed Share Program. “Because you helped make Reddit what it is today, you now have the opportunity to own Reddit at the same price as institutional investors,” the company wrote to the first group of guests, at both via email and direct message via Reddit.
The program allows users to purchase shares the day before the company’s stock begins trading, at a price set by Reddit’s bankers. If the start of a public listing sparks frenzied interest, shares purchased the day before the listing can immediately increase in value. Users will not face any restrictions on selling the shares.
These IPO buyouts are typically reserved primarily for large investors, such as pension funds and ETF issuers, who tend to hold stocks for a long period of time. Involving individual investors in an IPO can lead to unpredictable price fluctuations, as individuals may sell their shares early.
Companies such as Facebook and Robinhood suffered shocks to their stock prices after offering individuals an unusually large number of shares, about a quarter to a third of the IPO number. Airbnb, which has reserved about 7% of its IPO stock for hosts in the home rental market, has faced fewer problems.
Reddit hasn’t announced how many shares it will give users, but it will be a limited number. The first donations go to significant contributors, measured by joining the company’s advisory boards or having high karma, a secretly determined rating of a person’s behavior on Reddit. The first level also includes some of the busiest moderators, who create discussion forums and enforce the rules for contributing to them.
Additional waves of users with progressively lower contribution levels will be invited in the coming days. Everyone has until March 5 to express interest in purchasing shares, but no one is obligated to follow through with a purchase. Starting March 1, any user can try to sign up, regardless of their activity or moderation history, although some may end up on a waiting list.
