Icebreaker

🌈 Abstract

The article discusses the current state of the IPO market, highlighting the psychology and attention-based economy that shapes it. It focuses on the potential of Reddit as an undervalued company with a large user base and attention-capturing power, which could be the "icebreaker" to revive the IPO market. The article also touches on Reddit's monetization challenges, governance structure, and its connection to the meme stock movement.

🙋 Q&A

[01] The Market and IPOs

1. What is the current state of the IPO market, and what factors are shaping it?

• The IPO market has been in a "trauma" since retail investors were affected by the SPAC and rate hike phenomenon.
• There is a surplus of high-quality private companies and significant capital waiting to invest, but new offerings are scarce.
• The market is waiting for a high-profile business whose first public trade registers a healthy gain, which could act as an "icebreaker" to revive the IPO market.

2. What is the author's view on the potential of Reddit as an IPO candidate?

• The author believes that Reddit, whose IPO is expected to be priced next week, could be the "icebreaker" that the IPO market is waiting for.
• Reddit commands more attention in the U.S. than any company not owned by Alphabet, making it the "Saudi Arabia of attention."
• Compared to its website traffic, Reddit is undervalued, and the author sees a potential for a 100x return if Reddit figures out how to monetize its attention.

[02] Reddit's Monetization and Potential

1. What are the challenges and opportunities for Reddit in terms of monetization?

• Reddit has modest revenue growth of 20% due to an inferior ad stack and business model.
• However, if Reddit figures out how to monetize its attention, it could lead to a significant market calibration.
• Reddit is starting to cash in on its conversations, which are valuable training data for AI companies, and this could be a potential revenue stream.

2. What are the factors that could contribute to Reddit's potential market value?

• Reddit's particular form of attention is desirable to AI companies, and the company is starting to generate revenue from this.
• The author sees Reddit's governance structure, with the CEO having near-total control, as a potential downside.
• However, the author believes there is a non-zero probability that Reddit could become the most talked-about mid-cap firm in history, which could break the ice dam throttling the IPO market.