Reddit, known as the 'American version of Tieba,' submits IPO documents: allowing users to buy stocks. OpenAI CEO Ultraman becomes the third largest shareholder.

Zhitong App learned that Reddit, known as the "American version of Tieba," submitted an IPO application on Thursday. The related documents indicate that there will be a provision allowing some of the most active users to purchase the company's stock, which may pose greater risks for other investors.

On Thursday afternoon, the S-1 filing of this social media company revealed that some Reddit moderators and other users will have the opportunity to participate in this offering through a directed share program. This is unusual for a company as IPOs are mainly purchased by institutional investors.

The document stated, "Our users have a deep sense of ownership over the communities they create on Reddit. This ownership mentality often extends to Reddit as a whole. We see this in the passion our users have for the communities they build, their desire for Reddit to be as amazing as possible, and their willingness to call us out when we fall short. We hope this sense of ownership can translate into actual ownership - making our users our owners. Becoming a public company makes this possible. With this in mind, we are excited to invite users and moderators who contribute to Reddit to purchase our IPO shares alongside our investors."

However, in the "Risk Factors" section of the document, so-called Reddit users are also mentioned multiple times. Apart from cautionary statements about the business's dependence on users, participating in the IPO is also emphasized as a risk in itself.

"Redditor participation in this offering may exacerbate the market price volatility of our Class A common stock," the document stated.

Many IPO investors (both formal and informal) typically agree to a lock-up period, meaning they will not immediately sell the allocated shares after trading begins. However, the document mentioned that Reddit users participating in the IPO will not be bound by lock-up agreements, potentially increasing the stock's volatility. The document did not specify the percentage of shares allocated through this program.

Reddit users have shown a preference for trading stocks with significant volatility. The WallStreetBets chat room on the site was at the center of the meme stock craze in 2021, where users egged each other on to drive up stocks like GameStop (GME.US) and AMC Entertainment.

As for which users can participate, the document stated that Reddit will invite eligible users and then allocate shares through a tiered system based on "karma" (a user's reputation score reflecting their contributions to the community) measured by other users.

The related documents also revealed that Sam Altman, CEO of OpenAI, has become Reddit's third-largest shareholder. Entities associated with Altman hold 8.7% of Reddit's outstanding shares, including 789,456 Class A shares and 11.4 million Class B shares.

The largest shareholder of Reddit is Advance Magazine Publishers Inc., under the Newhouse family publishing empire, which holds about one-third of the voting rights. In 2014, Ultraman led a $50 million Series B financing round for Reddit, and in 2021, invested another $60 million. He even briefly served as Reddit's interim CEO, albeit for only eight days.

Public documents also show that Reddit's revenue in 2022 and 2023 was $6.667 billion and $8.04 billion respectively, with a net loss of $158.6 million in 2022 and $90.8 million in 2023.

In the fourth quarter of last year, the company achieved a net profit of $18.5 million, marking its first profit in two years.

As of December 2023, an average of over 76 million people visit Reddit every day.