Rumored Reddit IPO Hints at the Next Big Meme Stock

Reddit, the internet's freewheeling front page, has become a hotbed for this year's most memeable stock trades.

Recently unnamed sources told Reuters that the company is seeking out investment bankers and lawyers in preparation for an IPO, which has caused some to wonder if Reddit itself might join GameStop (NYSE: GME), AMC (NYSE: AMC) or Robinhood (NASDAQ: HOOD) as the next meme stock.

After its latest fundraising round last month, Reddit currently has a value of $10 billion. However, sources told Reuters that the site hopes to have a market cap of $15 billion before its IPO. Reuters' sources also said that the timing of the public offering will depend on market conditions; however, they said they expected it to happen sometime early next year.

Bolstering Reddit's prospects is a surge in user growth and subsequent ad revenue this year. Year over year, the company has trebled the amount it earns from ads, which reached $100 million in the second quarter. Millions of new users have poured onto the site since January, looking for the latest advice on how to play the meme trade.

Reddit declined to comment on the Reuters report. However, last month, Reddit Chief Executive Steve Huffman told the New York Times that the company did have plans to go public but hadn't settled on a timeline yet. "All good companies should go public when they can," he said.

Founded in 2005 by the aforementioned Huffman and Alexis Ohanian, Reddit currently boasts 100,000 online communities, otherwise known as subreddits. Since January, at least 52 million people have visited the site each day, although that number could be higher as Reddit hasn't provided more recent figures.

For years, Reddit had struggled for relevance in the shadow of Twitter (NYSE: TWTR) and Facebook (NASDAQ: FB). However, things changed in January when Reddit's most infamous community, WallStreetBets, caused a surge in interest in heavily shorted stocks. The most notable was GameStop, which traded at roughly $17 on January 4, only to shoot up by 1,100% a few weeks later.

While GME remains well off its January highs, the stock currently trades at roughly $200 a share at the time of this writing.

Users of WallStreetBets have since taken to the site to voice their thoughts about the rumored IPO. The general concern seems to be that Reddit will step up its advertising efforts to assuage future shareholders, which could cause the platform to lose some, if not all, of its panache.

"Anything they do to get more revenue will piss the user base off more- every year they need to increase revenue now," wrote user latestagecapitalist.

Nor do all members of WallStreetBets see Reddit as a good future investment.

"As a redditor I see this as a good thing," wrote user Karl_Marx. "That said, I'm not buying this stock, I'm convinced it will plummet on release."

Nevertheless, some see the frenzy surrounding Robinhood's IPO as a sign that shares of Reddit might still end up "going to the moon," despite the naysayers.