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Reddit cites r/WallStreetBets as a risk factor in its IPO filing (techcrunch.com)

submitted 5 months ago by L4s@lemmy.world to c/technology@lemmy.world

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Reddit cites r/WallStreetBets as a risk factor in its IPO filing::As Reddit finally files to go public, the company wrote in its S-1 filing that "meme stock" schemes on r/WallStreetBets could pose a risk to investors.

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[–] dragontamer@lemmy.world 18 points 5 months ago

Profitability is beginning to matter more. 5.25% Federal Funds rate, and a Prime-Rate of like 8.5%, means that it costs 8.5% for businesses to borrow money now.

So that means that if a business borrows at 8.5%, they must grow by 8.5% to just stay even with interest rates and the cost of borrowing money. Because a lot of these "growth" strategies involve losing money for years-and-years, you have to factor in the costs of those losses as well.

When Federal Funds Rate was 0.25%, no one cared about the cost of money or the cost of loans. Today, Wall Street cares, and you can see it in all the stock movements. The less-profitable companies have been getting hammered.