Reddit, Trump Media, and the Return of Meme Stocks | Pivot

We called it. S- or, "Reddit's IPO is a victory. Shares of the company are up 15% at the time of taping after jumping 48% on the first trading day. The market, uh, Reddit's market cap is currently over $9 billion." Uh, another thing we called, "Trump Media is a meme stock. Shares in the company jumped over 50% in the first minutes of trading, causing a brief volatility pause. Trump Media is trading at a market cap of almost $8 billion." Uh, the company made just $3.4 million in the first nine months of 2023, which is... And they lost a ton of money. They're losing, um, they're down 39% in users. It's just a, it's a scam of some sort. It's just a, it's a Ponzi sch- I don't know, what's the word you would use? Um, so talk about Reddit first, and then, uh, Trump Media stock.

Uh, we called this. They're... Reddit, uh, most trafficked site in America that's not owned by Alphabet. Incr- terrible monetization of that traffic, but at the same time that represents the opportunity. And, uh, there's also a ton of money on the sidelines. It just, all the moons lined up. I, uh, you just, you could just feel this thing was gonna get a big pop. And also, there's this very strange dynamic in the IPO market where it now makes sense for the company to price below the actual value they could get, such that, uh... Because here's the thing. We're talking about the fact that it was up 48%. That's, it's the only time you have this branding event to be kind of the most successful, or one of the more successful IPOs of the year. And people say, "Well, they left money on the table 'cause they could have priced it higher." When you're talking about a float of 20%, maybe you lose 2% of the company, but to be one of the most successful IPOs of the year and set the tone for your company, it's worth the dilution. So, this is the racket, and it is a racket. The investment banks say, "Price it below what it's worth, and it's good branding, it creates nice momentum, nice halo for you, you only give up a little bit of dilution. And we, the investment bank, get to essentially give free money to our institutional clients who generate fees for us." Now, the unfortunate thing is the average retail investor doesn't get to participate. They have to buy it at 47 bucks, even though it priced at 34, I think.

Mm-hmm. Mm-hmm.

So, it's a racket. It's another example of a transfer of wealth from lower-middle-income homes to institutions and rich people, or people with access. Some people would argue, "Well, Vanguard, Blackstone have a lot of money from firemen and teachers, and they get to participate." But be clear, the IPO market is an insider game, and it is a bit of a fixed racket.