Reddit shares plunge almost 25% in two days, finish the week below first day close

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
New
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,
when
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
company
was
on
the
firm’s “short
bench.”

Earlier
this
week,
Reddit
disclosed
in
a
corporate
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
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
company’s
shares.

“There’s
always
a
bit
of
a
disconnect,
because
the
purpose
of
bringing
the
company
public
is
twofold,”
Silverman
said. “It’s
not
just
to
generate
liquidity
for
the
company
itself
so
that
it
can
expand
and
grow.
In
these
situations,
it
often
allows
insiders
to
cash
out
to
generate
liquidity,
and
that’s
something
executives
have
to
consider
here.”

“If
the
prospects
are
so
bright,
why
are
insiders
selling?”
Silverman
added.

Reddit
shares
started
off
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.

The
New
Street
Research
analysts
wrote
in
a
note
that
they
wouldn’t
alter
their
$54
price
target
and
that
they
expect “volatility
into
the
first
earnings
report.”