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Reddit has had a tumultuous week; The social media platform’s stock price plummeted, reversing the initial enthusiasm surrounding the IPO.
Reddit shares closed the week at $49.32, down from the first day’s closing price of $50.44, after debuting on the New York Stock Exchange. The average loss is about a 25% loss in just two days of trading.
The downtrend began on Wednesday, with shares closing up 11% at $57.75. Hedgeye Risk Management described Reddit shares as “significant value” in a report, fueling selling and raising concerns about the company’s value.
Reddit CEO Steve Huffman’s sale of 500,000 shares increased investors’ anxiety. Director Jennifer Wong sold 514,000 shares. As these insider deals are evaluated, questions arise about company executives’ confidence in Reddit’s future prospects.
Ben Silverman, Verity’s vice president of research, points out the purpose of going public: to create the ability to expand the company and allow insiders to raise money. The timing of these sales during a volatile market has led to scrutiny of Reddit’s growth.
Despite an initial 30% increase on Monday and an 8.8% increase on Tuesday, driven by the positive attitude of investors, Reddit’s shares encountered problems. Even New Research’s $54 average price target couldn’t stem the decline, underscoring the uncertainty in the market.
As Reddit grapples with the post-IPO landscape, analysts expect more change, especially in the run-up to the company’s first earnings report The rollercoaster ride in Reddit’s stock price highlights the difficulty of balancing market expectations with the realities of operating in the fast-paced world of social media .