Fidelity has cut Reddit valuation to $5.5B from $10B
Fidelity has cut Reddit valuation to $5.5B from $10B
Fidelity has further slashed the estimated worth of its holdings in Reddit and Discord as well as SaaS startup Gupshup.
Still overvalued.
Right? How the hell is a company that has never managed to turn a profit worth more than $0?
Well it depends on why the company has never managed to turn a profit. A great example is Amazon. I think it existed for like 15 years before it first turned a profit because it was aggressively growing and spending all of their income to try to grow more.
As for Reddit, they are not growing like Amazon did. However, capturing a large user base is worth something because they may be able to monetize those users eventually. Investors view simply having a large user base as pretty valuable.
If you buy a house with a loan and pay it back, you haven't turned a profit either - but you do now own a house that has a theoretical value. That's basically how these things work, investing everything on growing the company in the hopes that some day what they have built can start creating profit, or be sold to someone who thinks they can.
(Worth noting that the vast majority of markdown in the value of Reddit and Discord holdings by Fidelity predominantly occurred last year.)
Oh, that means there’s more room to move down.
It's almost like loudly announcing contempt for your userbase is not good for a website where virtually 100% of their value is derived from the loyalty of their users
Reddit has very little intrinsic value. Its value comes from its userbase and isn't Reddit's to own.
it's almost like not listening to your users doesn't end well