So, the inevitable transaction, leads, naturally, to the inevitable question.
First, as was pre-ordained by the Gods, Reddit, which bills itself as “the front page of the internet”, has filed for an IPO. And why not? It is the 15th most visited website in the world, trailing only such titans as Google Search, Facebook, Insty, Amazon, YouTube and (regrettably) PornHub. It runs, also, just behind TikTok, but, given the recent antagonistic action emanating out of Washington against the Sino-video colossus, how much longer the latter can it hold its lofty position?
Reddit, meantime, generates hundreds of millions of dollars in revenues and is growing in a gratifying manner.
For the uninitiated, the site is subdivided by topic (or in the parlance of our times, subreddits), which cover any and every obsession under the sun. Interested in the pending move of the Oakland Athletics to Las Vegas? Simply visit r/OaklandAthletics. Prefer to commune with others, who, perhaps like many of us, enjoy passing our time by gazing at pictures of body parts mangled by motorized lawn instruments? Well, I can’t divulge the name of this subreddit, which, at any rate, is private, so perhaps the less said about this, the sooner mended.
Reddit achieved the Wall Street equivalent of the Warhol 15 minutes a couple of years ago, when a group of retail stock spit ballers took down some legit hedge fund ballers with one whale of a short squeeze. This adds an element of irony to the Reddit listing — a topic which we may (or may not) return to later.
All of which evokes the above referenced question: what is the ideal ticker symbol for the new listing?
To me the answer is obvious: AITA, which, as insiders know, is a reference to one of its most iconic subreddits, one that is in expanded form, is AMITHEASSHOLE, or r/AMITHEASSHOLE. Its content consists of posters presenting a conundrum wherein they have been compelled to act in ways with which they are not entirely comfortable. They lay out their stories and ask for the forum’s judgment as to whether or not they are the asshole. Commenters respond with NTA (Not the Asshole), or, at the other extreme DTA (Definitely the Asshole).
Now, it should be acknowledged that there is an element of subjectivity in these postings, as to ask posters to have laid out their strife-laden stories with perfect objectivity is perhaps beyond the realm of reasonable human expectation. But the collective wisdom of Redditors is routinely entertaining and occasionally enlightening.
Having looked this up, I find that r/AMITHEASSHOLE ranks a meager 100 on the list of most popular subreddits. But, for a couple of reasons, this is not an entirely fair representation of its influence. First, the traffic is split up relatively equally between r/AMITHEASSHOLE and r/AITA, which, when combined, places the concept at about 50th in the standings. Beyond this, I believe that AITA, more than anything else, is the most a propos branding for the Reddit platform.
One would believe, nay, expect, that the singularly brilliant company co-Founder/Owner Alexis Ohanian (who, among other brilliant strokes, managed to marry the fabulous Serena Williams), would understand this better than anyone. But one would be wrong on that score. Ohanian (no doubt as advised by an army of PR and Investment Banking types) has chosen instead the pedestrian handle of RDDT. The lawyers probably weighed in here as well, as AITA is allocated to an obscure Asian real estate consulting concern. Given that it has never, near as I can tell, traded, this can hardly be an obstacle.
One further wonders whether he might not be inclined to post to r/AITA whether or not he was the asshole for not selecting the sublime AITA for his ticker symbol. And, more broadly, whether an IPO is timely.
To wit respecting the latter, Reddit is unprofitable, having dropped a cool $90M last year. Moreover, the projected valuation is ~$6.5B – a material down round from the $10B at which, in the private market, it last raised capital.
I have no idea whether he has done so, but, much as I admire him, my only answer could be DTA, and I am compelled to assume that his early-round investors would vote the same way.
However, and in any event, I would counsel Alexis against losing heart. Because the world is full of As. Consider, if you will, the doings in Cambridge – a town which has seen happier days. In the most recent episode of Crimson Bathos, Harvard University released a summary of its finding in an investigation of Business School Professor Francesca Gino, renowned for research into fraudulent behavior by economic agents, for – get this – falsifying data. Moreover, the results only became public in consequence of Gino having sued the University for $25 large. My verdict here is that ETA – Everybody’s the Asshole.
However, returning to our primary theme, the RDDT (AITA) listing should make for some interesting Bathos on its own accord. On this tape at any rate, it is likely to be over-subscribed. Then, if the script holds, hedge funds that believe they know better will perhaps aggressively short it. Whereupon the Reddit investment militia will gleefully engage in another round of nut squeezing.
And, if current conditions sustain, they’re bound to be successful. The miscreant hedge fund owners will fold up shop. And probably console themselves with the purchase of sports franchises.
Because the tape remains mad powerful, its relatively tepid performance last week notwithstanding. Equity indices were tragically flat, and even the mighty BTC sold off. On the other hand, the data flows from macro land were fairly putrid – particularly on the Inflation front, and this is to say nothing of the depressing reality that the two ass-hat losers (DTAs) that no one wants have now locked down their party nominations.
The Inflation numbers (combined with disappointing Retail Sales figures) alone should have been a signal sufficient to engender, say, a couple of percentage point reversal, which might, under other circumstances, have done little more than corroborate an extension of the Bull Market. But nothing of this nature came to pass. One potentially curve-fitting explanation for this is that, somewhat improbably, the Fed went out of its way to reassure skittish investors that upticks in pricing be damned, interest rate cuts are still on their way. The FOMC, in any event, weighs in on Wednesday, so I reckon we’ll see.
Nominally, we must assume that the buying frenzy will thus continue. For how long, though, is anyone’s guess.
The biggest, darkest cloud on the horizon is the horrifying expansion in credit extension and consumption, as further illustrated below:
I would say that as a society, it’s DTA. The graph on right suggests a highly dubious tendency towards binging. The outcome is the more alarming graph on the left, which indicates that post lockdown, us Yanks are paying thrice the amount of aggregate interest that they was squeezing out of us during that shelter at home yukfest a couple of years back.
Some of this is plainly owing to higher interest rates. The rest? Maybe spending on some stuff we really didn’t need. And some of it, I fear, went into the market. Shame on those who took this route. They are DTA. The current average credit card rate is 22.5%. Thus, and bearing in mind that stock returns are subject to taxation (though not necessarily representation), in order to merely break even on this type of investment financing, one must generate a return of approximately 35%.
So, reiterating one of the cardinal rules of investment risk management, for the retail mooks among us, the best trade that can be made is to pay down credit card debt. Do the opposite and fund trading from this source? Well, DTA. I don’t wish to know you.
If, however, you choose to do so, and join the Reddit Investment Army, holding your fire until some DTA hedge funds load up excessively on the short side of some flukey stock, you will then not need me to tell you what to do.
Perhaps the name in question will be RDDT. If so, your defense of the name would buy you some grace, and possibly place you in the NTA camp.
Meantime, I reckon I’ll keep Redditing. I could post a great deal on AITA, but I am not of a mindset to be flooded with DTAs. I acknowledge both the wisdom and the justice in this. But I mean to fix it. If it’s the last thing I do. At that point, you and I can float away into a parallel universe where neither RDDT nor AITA can possibly enter our entwined consciousness.
TIMSHEL