According to TechCrunch, Reddit’s API pricing change were part of the company’s broader plan to lock down its corpus of user-generated content, which has been used to train AI models. On that front, Reddit’s IPO prospectus touts the promise of this growing business, noting that it’s already made $203 million so far from licensing its data to other companies.
However beneficial to Reddit’s bottom line, the money-hungry move led to significant backlash among Reddit’s community. After they learned that their favorite third-party Reddit apps — like Apollo, Narwhal, and others — were soon to become victims of Reddit’s fee changes, community members and moderators organized wide-scale protests.
Beware the apes, Reddit told the world in its IPO documents, Gizmodo reported. Put simply, the company warned potential investors that one of its subreddits, the infamous r/WallStreetBets, could make its stock price and volume extremely volatile — and there’s little Reddit can do about it.
According to Gizmodo, Reddit listed r/WallStreetBets as one of the possible risks to investing in the company in its S-1 form on Thursday, referencing the subreddit’s role in the meme stock craze of 2021, where retail investors banded together to raise the price of struggling companies like GameStop and AMC. The goal of r/WallStreetBets back then was to screw over professional investors on Wall Street and make them lose money for betting against certain companies.
It’s entirely possible that everyday people on r/WallStreetBets, a subreddit of 15 million retail investors who refer to themselves as “apes” and “degenerates,” and other online forum do the same thing with Reddit’s stock, the company stated.
Reddit wrote: “Given the broad awareness and brand recognition of Reddit, including as a result of the popularity of r/wallstreetbets among retail investors, and the direct access by retail investors to broadly available trading platforms, the market price and trading platform, the market price and trading volume offer Class A common stock could experience extreme volatility for reasons unrelated to our underlying business or macroeconomics or industry fundamentals…”
ArsTechnica reported Reddit filed to go public on Thursday, revealing various details of the social media company’s inner workings. Among the revelations, Reddit acknowledged the threat of future user protests and the value of third-party Reddit apps.
In its filing with the Securities and Exchange Commission (SEC), Reddit acknowledged that another such protest could hurt its pockets: “While these activities have not historically had a material impact on our business or results of operations, similar actions by moderators and/or their communities in the future could adversely affect our business, results of operations, financial condition, and prospects.
In my opinion, it appears that the Reddit CEO decided to mess around with the site, and is now entering the “finding out” stage.