Reddit Warns That r/WallStreetBets Could Wreak Havoc on Its Stock Price

An anonymous reader shares a report: Beware the apes, Reddit told the world in its IPO documents, though not in such explicit terms. 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. 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 the everyday people on r/WallStreetBets, a subreddit of 15 million retail investors who refer to themselves as "apes" and "degenerates," and other online forums could do the same thing with Reddit's stock, the company stated. Reddit writes: "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 volume of our Class A common stock could experience extreme volatility for reasons unrelated to our underlying business or macroeconomic or industry fundamentals." The volatility could cause people to lose all or part of their investment, the company explained, if they are unable to sell their shares at or above the IPO price. The long-term effect of movements like those propelled by r/WallStreetBets is already documented, with the takeaway being that surges of interest and heavy investment don't necessarily bring success to companies over time.

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