Key insights
- Allegations suggest Reddit is manipulating its revenue growth figures post-IPO to appear more stable and attractive to investors. The reported consistent quarterly growth rates around 70% are deemed highly improbable given historical yearly volatility and industry norms. This alleged manipulation, coupled with past questionable actions by CEO Huffman, could negatively impact investor confidence and the company's valuation, potentially signaling broader concerns about transparency in newly public tech companies.
Between 2015 and 2023, Reddit had yearly revenue growth rates of roughly 88, 67, 100, 60, 50, 57, 143, 47, and 20 percent. This averages out to 70%, with completely normal volatility.
However, ever since they IPO'ed, that volatility has vanished. The quarterly year-over-year growth rate has been sterilized into a very narrow range around 70%. Reported quarterly volatility in growth is now allegedly significantly lower than the yearly volatility before the IPO. That, of course, is complete BS.
https://imgur.com/a/reddit-faking-no-more-volatility-revenue-growth-6Rp8Feb
This is what they have reported over the last seven quarters: 69, 69, 68, 78, 62, 62, and 67 percent YoY revenue growth. There is basically a zero percent chance that revenue would grow at this high a rate with this low of a volatility over 7 quarters. It has never happened anywhere else, not even close, including Reddit pre-IPO. They are in all likelihood manipulating the numbers, smoothing them out to fake a low-volatility, high-growth business.
It would also not be the first time Huffman has been caught cheating: in 2005, he created fake accounts; in 2016, he edited user comments; and in 2023, he lied about being blackmailed by the Apollo app developer.