The trading floor of the New York Stock Exchange prepares for the IPO of social media platform Reddit in New York on March 21, 2024.
Spencer Platt | Getty Images
Reddit shares are in freefall after seeing a rebound following the social media company’s IPO last week.
Shares closed at $49.32, ending the week below their closing price on Reddit’s first day of trading on the New York Stock Exchange. They closed at $50.44 last Thursday. Stock markets are closed on Good Friday.
Shares of Reddit began their downward spiral on Wednesday, when they fell about 11% to $57.75 at market close. That day, Hedgeye Risk Management described Reddit’s shares as “grossly overvalued” in a report cited by Bloomberg News, adding that the company was on the “short bench” of the company.
Earlier this week, Reddit revealed in a company filing that CEO Steve Huffman sold 500,000 shares. Ben Silverman, vice president of research at Verity, told CNBC the move was expected and represents only “a portion of its holdings.”
Meanwhile, Jennifer Wong, Reddit’s chief operating officer, revealed that she sold 514,000 shares and now owns 1.4 million shares of the company.
“There’s always a little bit of a lag, because the goal of the company’s IPO is twofold,” Silverman said. “It’s not just about generating cash for the company itself so that it can grow and expand. In these situations, it often allows insiders to cash in to generate cash, and that is something that leaders need to consider here.”
“If the outlook is so bright, why are insiders selling?” Silverman added.
Reddit shares started the week on a high note and soared 30% on Monday. The company’s shares then rose 8.8% on Tuesday to close at $65.11, even after New Street Research issued a neutral rating on the company.
Analysts at New Street Research wrote in a note that they would not change their $54 price target and that they expected “volatility in the first earnings report.”
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