Reddit faces serious misinformation scrutiny now that it’s a public company

After its initial public offering on Thursday, March 21, Reddit is now under increased scrutiny to address misinformation on its platform. Analysts are advising the social media company to improve its content moderation to comply with the heightened regulatory standards of being a public entity.

Reddit is expected to start trading on the NYSE today under the ticker $RDDT. It priced its IPO at $34/share. @Axios business reporter @HopeKing joins with more: pic.twitter.com/QnQcpLopbe

— Squawk Box (@SquawkCNBC) March 21, 2024

Julian Klymochko, CEO of Accelerate Financial Technologies, expressed concerns that Reddit’s current reliance on volunteer moderation might not be sustainable with the additional regulatory oversight it faces.

“It’s like relying on unpaid labor when the company has nearly a billion dollars in revenue,” Klymochko said.

Ring the register! That is one helluva IPO pop$RDDT opens for trading up +61% on its debut

The IPO floodgates have now opened https://t.co/4HJhVt1YWt

— Julian Klymochko (@JulianKlymochko) March 21, 2024

With Reddit’s revenue reaching $804 million in 2023, Klymochko believes the company must significantly invest in trust and safety initiatives, which could lead to a sharp increase in expenses.

Despite its nearly two-decade history, Reddit has encountered various challenges, including changes in leadership and dissatisfaction among its users. Although the company boasts 73 million active users, it has yet to achieve profitability, with losses increasing to $717 million from $467 million in 2021, the year it initially considered an IPO.

Nonetheless, Reddit’s shares jumped 48% in their New York Stock Exchange debut, a notable performance despite the company’s longstanding lack of profit.

Experts anticipate that Reddit will increase its expenditure on enhancing safety and trust measures, essential for maintaining advertiser relationships and removing inappropriate content.