He gifted himself a ludicrous $193 million compensation package.
Reddit, a 20-year-old company, has yet to turn a profit. In 2023, the platform lost a whopping $90.8 million.
Can someone explain to me how reddit can make a loss, while he pays himself MORE than the loss?
Does that not mean that reddit would have made a 113 Million profit before his $193 million compensation package?
What kind of business-algebra-gymnastics is at work here?
Does that not mean that reddit would have made a 113 Million profit before his $193 million compensation package?
No. His normal salary is around 300k a year. This $193 million figure was the presumed valuation of a stock/options package he received ahead of the IPO. It doesn’t cost the company anything to pay him in stock, so it doesn’t affect the profit/loss calculation.
If it doesn’t cost anything to company to pay in stocks, why don’t they give me like 1m $ value of stock? That would make me very happy and it costs nothing to them anyway
I know you’re just being funny, but the idea is that Spez’s shares and resulting influence over a publicly traded Reddit will incentivize investors to buy stock, raising the value of the stock for all shareholders. The problem with this idea is that Spez is an idiot who is actively sabotaging Reddit’s long term viability.
Yes but where is the $300k coming from if they’re losing $90.8m a year? How can they afford to stay in business? Before they went public, who was foolish enough to invest in a company that has never turned a profit? The money doesn’t just come out of thin air. Someone has to be giving it to him.
If I was rich and started a company that lost $90.8m a year, I’d shut down after less than a year before I went broke and homeless. How can a company that never turns a profit make enough money to pay any employee, let alone the CEO?
Before they went public, who was foolish enough to invest in a company that has never turned a profit?
You’d be surprised. The basic strategy of losing money hand over fist for years to grow yourself to as large a user base as possible, before finally aggressively monetizing that user base, is well established in silicon valley. Investors would not even raise an eyebrow at the loss numbers posted by Reddit because of how exceedingly common that is.
And it has worked several times, making some people ridiculously wealthy. Good examples are Amazon, Facebook, and Uber. So usually companies on this level have raised hundreds of millions to sometimes billions of dollars in investment capital, allowing them to operate at these levels of losses for years at a time.
Reddit has a lot of users that spend a lot of time there, so it is advertising potential, and a lot of Brands pay for ads on Reddit. Investors hope they will eventually make enough ad revenue to turn a profit.
However Twitter was and is in the same boat, it is a big site with many users, but was never profitable.
Can someone explain to me how reddit can make a loss, while he pays himself MORE than the loss? Does that not mean that reddit would have made a 113 Million profit before his $193 million compensation package? What kind of business-algebra-gymnastics is at work here?
No. His normal salary is around 300k a year. This $193 million figure was the presumed valuation of a stock/options package he received ahead of the IPO. It doesn’t cost the company anything to pay him in stock, so it doesn’t affect the profit/loss calculation.
Gotta love that monopoly money
If it doesn’t cost anything to company to pay in stocks, why don’t they give me like 1m $ value of stock? That would make me very happy and it costs nothing to them anyway
I know you’re just being funny, but the idea is that Spez’s shares and resulting influence over a publicly traded Reddit will incentivize investors to buy stock, raising the value of the stock for all shareholders. The problem with this idea is that Spez is an idiot who is actively sabotaging Reddit’s long term viability.
Yes but where is the $300k coming from if they’re losing $90.8m a year? How can they afford to stay in business? Before they went public, who was foolish enough to invest in a company that has never turned a profit? The money doesn’t just come out of thin air. Someone has to be giving it to him.
If I was rich and started a company that lost $90.8m a year, I’d shut down after less than a year before I went broke and homeless. How can a company that never turns a profit make enough money to pay any employee, let alone the CEO?
You’d be surprised. The basic strategy of losing money hand over fist for years to grow yourself to as large a user base as possible, before finally aggressively monetizing that user base, is well established in silicon valley. Investors would not even raise an eyebrow at the loss numbers posted by Reddit because of how exceedingly common that is.
And it has worked several times, making some people ridiculously wealthy. Good examples are Amazon, Facebook, and Uber. So usually companies on this level have raised hundreds of millions to sometimes billions of dollars in investment capital, allowing them to operate at these levels of losses for years at a time.
Uber yeah, but the others are probably profitable overall.
So is Uber, since this year. My point is, all of these companies ran hundreds of millions of dollars in the red for years before turning a profit.
Reddit has a lot of users that spend a lot of time there, so it is advertising potential, and a lot of Brands pay for ads on Reddit. Investors hope they will eventually make enough ad revenue to turn a profit.
However Twitter was and is in the same boat, it is a big site with many users, but was never profitable.
It’s a calculation popularized by fintech bro’s in the late oughties.
It’s called pulling an FYGM, a fuck you got mine, colloquially known as a rug pull.
Sure. You’re not an accountant, neither is whoever wrote that, it’s a bunch of bullshit and the IRS made sure they got paid.