this post was submitted on 21 Jun 2023
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In fairness, the IPO was probably knackered already. One of Reddit's main investors, Fidelity Inc. dropped their valuation of Reddit shares by almost half some months ago, and I can't imagine that would do particularly good things to any IPO efforts that Reddit might have been trying to pull. Were I an investor, I'd probably steer away from Reddit if their valuation suddenly plummeted by that much.
Never mind the whole API changes lately, which both puts the users into an uproar, and makes a mess of things that could cause advertisers to pull out, dropping their revenue even further, and the AMA/Interviews with the CEO don't only show the CEO to be a liar, but have him admit that Reddit is unable to make its own first-party app profitable, unlike third-party apps that let users access the site, which smells like mismanagement. I'd have a lot of questions, and none of them are good.
I wouldn't be at all surprised if the recent changes were an effort to try and salvage their stock price, by pushing AI, and bumping up their revenue by making AI companies pay to use the API to integrate their models with Reddit, and/or as a way to pump and dump Reddit, so that they can get out before the money runs dry.
That being said, this whole debacle is making Reddit stocks tastier for risk-tolerant investors; The more the valuation plummets now, the more potential it has to bounce back.
Most likely long-term outcome of this whole thing IMO: The valuation continues to go down for the next several months as the fallout from this API decision and subsequent protests drives away more users and advertisers and generates more bad press. Eventually the internet forgets about it (minus the "power users" who have already migrated elsewhere), and Reddit will wait until well after that for their IPO. Whether before or after the IPO, u/Spez will be replaced as CEO. While that likely won't change much, it'll be a symbolic move to say "we listened to the users/investors." After which, valuation will quickly recover to pre-debacle levels.
Only question from there is whether the loss of the "power users" was enough to send the site on a permanent downward trajectory. My guess is probably not; plenty of people left to fill that void. Reddit will continue on, as a slightly shitier, more investor-friendly site.
I honestly got the impression that the u/Spez AMA was intentionally shitty, as an attempt to scapegoat him. I cannot fathom how a multi billion dollar company could allow that to happen unintentionally. It was comically bad. They're just waiting until after the API change goes live to actually can him, so they don't have to change the decision.