The trading floor of the Recent York Stock Exchange prepares for the social media platform Reddit’s initial public offering in Recent York City on March 21, 2024.
Spencer Platt | Getty Images
Reddit shares are plummeting after experiencing a rally stemming from 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 Recent York Stock Exchange. They closed at $50.44 last Thursday. Stock markets are closed on Good Friday.
Reddit shares began their downward spiral on Wednesday, after they sank about 11% to $57.75 at market close. That day, Hedgeye Risk Management described Reddit’s stock as “grossly overvalued” in a report cited by Bloomberg News, adding the corporate was on the firm’s “short bench.”
Earlier this week, Reddit disclosed in a company filing that CEO Steve Huffman sold 500,000 shares. Ben Silverman, vp of research at Verity, told CNBC the move was expected and represents just “a portion of his holdings.”
Meanwhile, Reddit Chief Operating Officer Jennifer Wong disclosed that she sold 514,000 shares and now holds 1.4 million of the corporate’s shares.
“There’s all the time a little bit of a disconnect, since the purpose of bringing the corporate public is twofold,” Silverman said. “It is not simply to generate liquidity for the corporate itself in order that it could possibly expand and grow. In these situations, it often allows insiders to money out to generate liquidity, and that is something investors have to think about here.”
“If the prospects are so vibrant, why are insiders selling?” Silverman added.
Reddit shares began off the week on a high note and soared 30% on Monday. The corporate’s shares then rose 8.8% on Tuesday to close at $65.11, even after Recent Street Research issued a neutral rating on the corporate.
The Recent Street Research analysts wrote in a note that they would not alter their $54 price goal and that they expect “volatility into the first earnings report.”