Far more terrifying is a site that is perpetually at the mercy of a handful of powerusers. That if the winds change, they collectively could tank the value of the product with no way for investors to intervene. If I were going to invest in Reddit, I would want the CEO to show that ultimately he/reddit is in control. He is a known, predictable quantity. He is also someone that can be replaced if things go too far off the rails. The whims of the pseudo-aristocracy is completely out of my control.
If a subreddit for a class of products gets flooded with sale spam, low quality content, memes, it will push the users who create higher quality content away. The same for a subreddit about hobbies, if it's not curated to have a good intro FAQ and collection of guides for beginners, and good moderation that is empathetic but can enforce guidelines on questions that constantly pop up, it will push people away because of the noise.
Moderation on reddit is what can control the noise, with a low signal-to-noise ratio the power posters disappear.
I think the best scenario (globally) is that a new generation of internet power users, at least 5-20% of them, would learn federation and forums. This could be a lesson for... half a decade, maybe. The ones foolish enough to stay in their pens will be only having it worse as time goes on.
But that in some form should be terrifying to institutional investors evaluating or underwriting this IPO. Will users under the new status quo have significantly different retention patterns and lifetime value when consuming content moderated by the moderators that led Reddit to the point where it's able to IPO in the first place?
It's very possible that retention numbers drop through the floor because subreddits lose the unique character that made Reddit different from any other social media platform - a character traced through a continuous history of mods on large and small subreddits, chosen as stewards of established per-subreddit culture, now to be wiped away. In the current market environment, doesn't that make Reddit a riskier investment than ever?
And it wouldn't take a lot to fix. Spez doesn't even necessarily need to reverse the API restrictions. He just needs to communicate and listen to mods with empathy, and establish that empathy publicly and privately as a top company priority. It's not too late for him to do that and save the company. And the more he refuses to do that, the more questions investors will ask about his readiness to lead.