Reddit stock is falling back to Earth because the short-sellers have arrived

Some 7% of Reddit’s free share float (or more) has been sold short so far, according to an estimate from the analytics company Ortex cited by Reuters. That’s something the social platform was worried would happen, noting in its prospectus that retail traders in its subreddits (and particularly on r/WallStreetBets) could cause “extreme volatility” in Reddit’s share price. Those Redditors had already signaled in posts that they were planning to short the stock.

Public data revealing short interest positions on Reddit won’t be available until April 9.

Reddit shares fell as much as 11% at market open to a low of $51.52 after an already-bad Wednesday. Bloomberg reports that Wednesday’s decline was in part due to a Hedgeye Risk Management report naming Reddit as a short idea, saying the stock could plummet 50%.

Reddit’s share price in the low $50 range is still well above its IPO price of $34, and even above its impressive first-day closing price of $48, which had investors chattering about the company’s impressive gains.

some_guy,

I hope it craters.

RampantParanoia2365,

Now do Truth Social.

Dkarma,

Let them mortgage their trailers first.

lemmybereal,

Would be very fitting if their own community would bring that stock down.

ccunning,

Wouldn’t blame them after the IPO. Who wants to Create Shareholder Value for free…for someone else?

Anticorp,

Even yahoo finance lists them as overvalued.

ColeSloth, (edited )

They say as much as 50%. I say it’s going to go a bit lower. It went up to almost $75, but I think it will go under $25 before it starts to rebound. I bought my put options Monday morning. So far the stock is doing what I expected it to do, and I expect the decline in price will persist for the next couple months.

I don’t have a big enough bankroll or time to sit at my computer to pull off short selling, so puts are my best bet. I will feel the tiniest bit bad for the people who made the put contracts to buy getting reemed, but honestly, if they knew what they were getting into. Like if they actually knew reddit and really researched things, they never would have been offering put contracts to begin with on Monday.

Sludgeyy,

Shorting a stock does not lower the stock price.

Anticorp,

It does if enough people do it. Shorting a stock puts a bunch of sell orders up, and a bunch of sell orders lowers the price.

Sludgeyy,

People not wanting to buy and hold the stock lowers the price.

If everyone wants to short it and no one wants to buy it, then the price will go down.

Not really going down because of the short but lack of demand

Also only temporary because people shorting the stock will eventually have to buy the stock back.

Anticorp,

Also only temporary because people shorting the stock will eventually have to buy the stock back.

Sometimes at a huge loss. I’d love to short them, but I don’t like the idea of opening myself up to infinite losses.

livus,
livus avatar

Yeah I've already seen an article talking about squeezing it if it gets too much short action.

livus,
livus avatar

Not by itself. But a lot of short interest can indicate that analysts think a stock is overvalued and that does tend to lower the price.

altima_neo,
@altima_neo@lemmy.zip avatar

Misleading article.

They’re complaining that the stick closed at $50 but not mentioning the IPO opened at $35. The value hasn’t “fallen back to earth”, it’s gone up.

livus,
livus avatar

@altima_neo they definitely mention that though?

Reddit’s share price in the low $50 range is still well above its IPO price of $34, and even above its impressive first-day closing price of $48, which had investors chattering about the company’s impressive gains.

Anticorp,

It was up to $75 a couple days ago. It’s falling back to earth.

verity_kindle,
@verity_kindle@lemmy.world avatar

I’m immeasurably excited about this. This popcorn tastes amazing and will never run out. They were, indeed, one of the last fun communities. One of the first to go lights out during APIpocalypse, if I remember correctly. Those apes will always have a special place in my heart.

sartalon,

They are seriously trying to blame WSB for this?. LMAO, Fuck Spez.

ccunning,

They actually listed it as a risk in the IPO prospectus.

sartalon,

Because they were going to dump it themselves and were trying to lay the groundwork to blame WSB?

AdmiralShat,

Can we trust that posts made to reddit to purposefully influence reddit stock are legitimate posts and not manufactured by the admins in some way?

dual_sport_dork,
@dual_sport_dork@lemmy.world avatar

No, nor can we rule out that they’re not attempts at influence by external actors, either.

I think the best course of action is to just not touch the fucking thing – the stock, or the site.

istanbullu,

Is wsb behind it?

_haha_oh_wow_,
@_haha_oh_wow_@sh.itjust.works avatar

No, the price was ridiculously inflated with no basis on reality: It was never going to do well.

n0m4n,

Hearing that Reddit is subject to a lawsuit over a mass shooting and the toxic crazy that some of its subs were allowed!? Reality was going to hit. The unpaid volunteers had their mod tools dismantled, and were effectively driven out. This short was only a matter of waiting for the right time.

Lanusensei87,
@Lanusensei87@lemmy.world avatar

Looking forward to the inevitable “This is Financial Advice 2” video out of this.

Schaedelbach,

Yeah, same! But I guess I’m actually looking forward to any video from Dan. He makes the best long form content on YouTube. His channel is called Folding Ideas - for those who never heard of him.

1984, (edited )
@1984@lemmy.today avatar

Well it should plummet 50%, it’s worth maybe 25 dollars right now.

In a year it will be down at 15.

RightHandOfIkaros,

This is funny, but isnt it kinda normal for a new IPO stock to drop like a rock within its first week or so?

perviouslyiner,

Isn’t it usually undervalued as a way to “pay” the institutional investors who pre-buy shares? Then they sell immediately after the first-day peak which makes the price drop.

Kecessa,

Depends, Beyond Meat didn’t fall for two months and didn’t go under first day opening price for 10 months.

SkippingRelax,

Not a fan of artificial meat but I believe bm had a potential market that wanted their products, in a new industry that has plenty of potential.

Besides pure speculation/gambling, what does reddit have to offer to genuine investors in 2024? They never made a profit, they don’t have a plan to make profit, they are alienating their users and their mods, they are low in the list of social media sites by usage with no credible plans to climb up the ladder. Really what’s in there to invest in?

If I put money in a single stock ipo I want to believe that they are going public to raise funds that will be used to enact a credible businessplan. I might still be wrong and be left to hold someone else bag, but at least I believed in an idea.

For the past few weeks teddit was trying to sell stock to their users and their employees families. That’s MLM marketing for you

livus,
livus avatar

Yes if they are overvalued. Here's a comparison with other tech IPOs.

What's happening next is anyone's guess.

gravitas_deficiency,

What’s happening next is

stock go down

ColeSloth,

Reddit went public the same way robinhood did. Well known name recognition and seen unfavorably by many of their users when going public.

So far it’s following the same path. Initial quick rise due to name popularity, then it will drop for a couple months before slowly rebounding back up part way to a more realistic price point for its valuation.

Personally, I think reddits real pricepoint should be $20 to $30 a share. I’m guessing it will drop below that point before going back to it. Short selling popularity may take it there faster, but im saying it will go under $20 a share either way.

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