- Retail traders’ favorite social media platform Reddit secured a $700 million Series F funding round.
- The new cash infusion values the message board platform at approximately $10 billion.
- Co-founder Steve Huffman said, “We are still planning on going public, but we don’t have a firm timeline there yet.”
Every trader on the planet knows that recently-public Robinhood Markets Inc. (NASDAQ: HOOD) has been riding a wave of eye-popping price swings since its debut on July 29. Traders are naturally looking to upcoming IPOs for similarly crazy moves. Could Reddit’s Series F funding — as well as a rumored IPO — bring about similarly insane trading opportunities? Let’s break it down…
What Is Reddit?
Founded in 2005 by then-college roommates Steve Huffman and Alexis Ohanian, Reddit’s initial goal was to become “the front page of the internet.”
But in 2009, the founders sold their stake in the company to publishing giant Conde Nast for between $10 million and $20 million.
Then Reddit began to take on a life on its own, becoming the de facto message board app for niche hobbyists across a wide variety of applications.
In other words, nerds from all over the world flocked to Reddit to discuss highly-specialized topics with other similarly curious nerds.
Today, this phenomenon has exploded into an undeniable online town square. Reddit users have weaponized the hive mind of the platform to accomplish everything from solving cold-case missing-person cases to nearly bankrupting some of the world’s most powerful hedge funds.
New Funding Signals Potential IPO
As the town square has grown larger (and more crowded,) the power of Reddit has not been lost on the private equity market.
Through eight funding rounds since 2005, Reddit had already secured a valuation of $919 million before today’s Series F announcement. The new sprinkling of cash from the Series F puts Reddit above a whopping $10 billion valuation.
Editorial credit: chrisdorney / Shutterstock.com
Meanwhile, Reddit’s fundamental earnings narrative seems to be tracking the funding rounds. In its official Series F disclosure, the company writes, “This year Reddit marked its first $100 million advertising revenue quarter (Q2 2021), representing a 192 percent increase compared to the same period last year.”
While these revenues place Reddit in the minor leagues compared to other big tech giants, the year-over-year growth displayed is impressive, to say the least.
But in a historically saturated IPO market, why should traders pay particularly close attention to a potential Reddit debut?
Why Traders Should Follow Reddit
In social media circles, Reddit is inextricably tied to Robinhood. They’re often seen as representing two factions of a bloody war in the stock market — retail traders vs. hedge fund order flow, respectively.
In the lead-up to Robinhood’s IPO, there was much discussion about how insanely volatile the stock would be. But once the stock went live, plummeting on its opening day before ripping to new highs, many traders missed the initial moves.
It seems a lot of retail positioning was too emotional around Robinhood. The general consensus among many retail traders is that Robinhood is an evil empire, unacceptable for any sort of long play. But those traders missed a huge setup…
Publicly traded Reddit stock could go absolutely bananas just like Robinhood. For a lot of retail traders, these two companies are inextricably linked.
And it’s likely that many people who scalped positions in and out of Robinhood would do the same around Reddit stock.
This is why traders should pay close attention to a future Reddit IPO. The retail army will likely attempt to get their grips around Reddit just as they did with Robinhood.
Compared to Robinhood, the sentiment around Reddit is the opposite. For the vast majority of retail traders, Reddit’s a safe space, money-making enterprise, and tool for making friends.
A publicly traded version of Reddit stock could make way for unbelievable volatility. Traders should keep their eyes peeled.
Featured image editorial credit: Tero Vesalainen / Shutterstock.com