Loyal Reddit users could win big from its IPO

• Some Reddit users could be among the first to buy the company's stock in its IPO next month.
• The so-called "Redditors" would join money managers in buying shares at their opening price.
• It's an unusual strategy, but one that stock trading app Robinhood tried in 2021.

Reddit's most frequent users could go from posting comments to posting gains — or losses — when the company goes public.

Some 75,000 of the company's biggest users will have the chance to buy its stock at the IPO price in March before it starts trading, The Wall Street Journal reported on Wednesday. The exact number of shares that will be available to those power-posters wasn't known, according to the Journal.

Giving Reddit users, known as "Redditors," such preferential treatment in the IPO is unusual. When companies offer stock for the first time, they generally sell the shares to investment funds and other groups with millions or billions to drop, not individuals.

The approach has been tried before, though. Trading app Robinhood offered some of its users stock when it went public in 2021. Small-time investors like users tend to be faster to sell their shares than money managers, and Robinhood's first day of trading was more volatile partly because of the strategy, the Journal reported.

The market for IPOs remains tough, even for companies with a more conventional strategy. Few technology companies went public in 2023 despite hopes for a comeback. And some that did, such as Instacart and Klaviyo, wound up trading well below their IPO share price.

In January, Bloomberg reported that Reddit is targeting a $5 billion valuation for its IPO — half of what the company could have been valued at in a stock sale three years ago.

Reddit did not immediately respond to a request for comment from Business Insider on the Journal's report.