The barter floor of the New York Stock Exchange prepares for the social media platform Reddit’s initial public offering in New York New Zealand urban area on March 21, 2024.
Spencer Platt | Getty Images
Reddit shares are plummeting after experiencing a rally stemming from the public media company’s IPO last week.
Shares closed at $49.32, ending the week below their closing quotation on Reddit’s first day of trading on the New York Stock Exchange. They closed at $50.44 last Thursday. Stock furnishes are closed on Good Friday.
Reddit shares began their downward spiral on Wednesday, when they sank back 11% to $57.75 at market close. That day, Hedgeye Risk Management described Reddit’s stock as “grossly overvalued” in a check up on cited by Bloomberg News, adding the company was on the firm’s “short bench.”
Earlier this week, Reddit uncovered in a corporate filing that CEO Steve Huffman sold 500,000 shares. Ben Silverman, vice president of research at Verity, recounted CNBC the move was expected and represents just “a portion of his holdings.”
Meanwhile, Reddit Chief Operating Officer Jennifer Wong disclosed that she won overed 514,000 shares and now holds 1.4 million of the company’s shares.
“There’s always a bit of a disconnect, because the purpose of inviting the company public is twofold,” Silverman said. “It’s not just to generate liquidity for the company itself so that it can expand and to gain. In these situations, it often allows insiders to cash out to generate liquidity, and that’s something executives have to judge here.”
“If the prospects are so bright, why are insiders selling?” Silverman added.
Reddit shares started off the week on a high note and hovered 30% on Monday. The company’s shares then rose 8.8% on Tuesday to close at $65.11, even after New Road Research issued a neutral rating on the company.
The New Street Research analysts wrote in a note that they wouldn’t adapt their $54 price target and that they expect “volatility into the first earnings report.”
