Reddit's WACC is its cost of equity — and that's a vulnerability

Reddit (RDDT) carries effectively no debt — making its cost of capital identical to its cost of equity at 12.05%. That sounds simple, but it's the opposite of robust. A WACC that lives or dies on a single CAPM input has no shock absorber. Beta 1.55 against a 5.00% ERP does most of the work; one beta revision moves Reddit's discount rate 50bps.

§ 01The WACC build for an all-equity firm

When debt is zero, WACC collapses to Ke. There's no tax shield to extract, no weighted average to balance. CAPM does all the work — and the three inputs each carry their own debate.

RDDT · WACC inputs (Q1 2026)

Component	Source	Value	Range
Cost of equity (CAPM)
Risk-free rate (Rf)	10Y UST · Jun 29 2026	4.30%	3.80 – 4.80%
Equity risk premium (ERP)	Damodaran · US implied	5.00%	4.5 – 5.5%
Beta (5Y monthly)	levered, no debt adj.	1.55	1.30 – 1.80
Cost of equity (Ke)		12.05%	10.65 – 14.70%
Cost of debt
Pre-tax Kd	no rated debt outstanding	n/a	indicative 7.5 – 9.0%
Tax rate	marginal	25%	—
After-tax Kd	illustrative if debt added	~6.0%	5.6 – 6.8%
Capital structure (market value)
Equity weight	100.0%	—	—
Debt weight	0.0%	—	—
WACC		12.05%	10.65 – 14.70%

WACC in one number

12.05%

All-equity

Pure CAPM. Ke = Rf + β · ERP = 4.30 + 1.55 × 5.00 = 12.05%. No debt, no tax shield, no leverage component.

The structural weakness

A diversified capital stack provides shock absorption. When ERP rises 100bps, a 50/50 debt-equity firm sees WACC move ~50bps; Reddit moves the full 100bps × beta. The all-equity discount is reflexive — equity prices itself.

Reddit snapshot

RDDT · $182.40MC $32.1B

Cash $2.05B · Debt $0 · Op CF (TTM) $478M · Op margin (Q1 '26) ~14%