Reddit did not immediately respond to a request for comment for this story.
Unwanted quotes
The investment offers Reddit offers to its users are called targeted sharing programs. “Because you helped make Reddit what it is today, you now have the opportunity to become a Reddit owner at the same price as institutional investors,” the company wrote to the first group of invitees via email and direct message via Reddit road.
The program allows users to buy shares of a company the day before they begin trading, at prices set by Reddit bankers. If the start of public trading generates a frenzy of interest, the value of shares purchased on the eve of the trade may immediately skyrocket. Users will not be subject to any restrictions on selling stocks.
This type of IPO buying is typically reserved primarily for large investors, such as pension funds and ETF issuers, who tend to hold onto stocks for the long term. Having individual investors participate in an IPO can lead to unpredictable price swings, as individuals may be quicker to sell their shares.
Companies such as Facebook and Robinhood have taken a hit after companies such as Facebook and Robinhood issued unusually high amounts of stock to individuals – about a quarter to a third of the number of shares in an IPO. Airbnb has set aside about 7% of its IPO shares for landlords in the rental market, so it faces fewer problems.
Reddit has not yet announced how many shares it will allocate to users, but they are limited. First, significant contributors are measured by being on the company’s advisory board or having high karma, a secretly determined level of someone’s actions on Reddit. The first tier also includes some of the busiest moderators, who create forums and enforce the rules they contribute to.
More users with progressively lower contribution levels will be invited in the coming days. Everyone has until March 5 to register an interest in buying shares, but no one is obliged to follow through. Starting March 1, any user can attempt to register regardless of activity or moderation history, although some users may be placed on a waitlist.
To be eligible to participate in the program, users must be 18 years of age or older and must reside in the United States. These restrictions annoy some teen mods, as well as mods from several other countries. “Reddit users outside the United States are equally important to Reddit’s growth,” the company wrote in a FAQ on its website, citing unspecified geo-restrictions. “Unfortunately, this matter is out of our hands.”
Cook, a gaming fashionista who lives in the U.K., said the international circulation of the shares would not convince him to buy the shares, but added that Reddit’s inability to find workarounds or work toward fairness “doesn’t instill confidence.”
Former Reddit employees involved in preparations for the IPO said dissatisfaction from overseas moderators had long been considered a pitfall of the plan. Staff also told executives they believed many moderators would be afraid to accept, fearing it would taint their volunteer work or anger community members by appearing to be selling out. But Cook had a different story: He said stocks simply weren’t the return the volunteers were looking for. “The ‘reward’ for moderators is to make their community a better place for everyone,” he said.