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this post was submitted on 01 Jul 2023
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That’s not them actually losing money, though. They’re a private company, not a public one. Their valuation is just what analysts think that they’re worth—it has nothing to do with how much money they have.
But valuation is a very real predictive measure on IPOs, and what Reddit is making all these bad decisions in preparation for. They tried to cut a little more pie by dragging third party app users onto their app to try and increase revenue and bump valuation, it's just that it was so terribly misguided and executed that it had the opposite effect and blew up in their face.
True, but the valuation is for investors and per fucknut, Reddit isn’t making any money, hence the api push to a paid platform.
Also, Reddit is going public soon when they IPO and investors aren’t going to want to invest in a bot ridden, non active community.
I’d say 75%+ used Reddit on their phones and many of them used 3rd party apps.
The point is, Reddit IPOing soon and then this fiasco is the worst thing for them.
Splez recently said he thinks they will now go for the IPO later than they had planned originally. So I guess he's hoping this will blow over, the public/investors will forget and they'll recover. I'm not so sure.
They definitely pulled a digg. This is going to hurt them a lot more than they think.
That is true.
Private companies (which is most businesses) are still worth something. If big investors like Fidelity value your business at $1bn, banks will absolutely consider that as collateral for loans and so on. And if they say your business has halved in value, they’ll consider that too.
Reddit is antsy to effectuate their exit strategy.
Or to put it more simply: everyone with a stake in Reddit, from pigboy Huffman, to institutional investors like Fidelity, to employees who earned equity is eager for Reddit to have their IPO so they can offload their shares on the public stock market.
Their valuation will be an important factor, if not the most important factor, that will determine for which price those stocks will initially be put on the market.
So while slashing the valuation in half will not directly lose them money, it could translate into the initial stock price being half of what they anticipated, causing them to get half of what they would’ve gotten had the valuation not be slashed in half.
There is no way in hell that people with equity in Reddit are not pissed about the slashing of the valuation, since they now anticipate getting a haircut as much as half of what they initially expected to get.
Greedy Pig Boy has said for a long time that Reddit isn't profitable. That means they're losing money every year.
It could also be accounting tricks. If they pay themselves a bunch of money, reddit inc. doesn't make a profit, but the individuals working for it do.