https://www.marketwatch.com/story/reddits-offering-marks-return-of-junk-stock-ipo-new-constructs-says-1acb8f73As Reddit’s initial public offering nears, independent equity-research firm New Constructs is warning investors to avoid the social-media platform’s IPO.
“Reddit’s IPO marks the return of the junk IPO,” New Constructs CEO David Trainer wrote in a note. “We think the company may never monetize its platform without angering its users, and the entire premise of Reddit is user-generated content. This business model is inescapably built on a catch-22: Make money or please users.”
Reddit publicly filed the registration statement for its IPO last month, citing the opportunity to grow the platform, as well as its business, through advertising, monetizing commerce on the platform and licensing data. “Advertising is our first business, and advertisers of all sizes have discovered that Reddit is a great place to find high-intent customers that they aren’t able to reach elsewhere,” Reddit co-founder and CEO Steve Huffman said in the S-1 filing. “Advertising on Reddit is rapidly evolving, and we are still in the early phases of growing this business.”
