Reddit shares are dropping just a week after the social media company experienced a steady rise in its IPO.
Ending the week on Thursday, Reddit shares closed at $49.32, below the closing price of the first day of trading on the New York Stock Exchange. The stock market was closed on Good Friday.
On Thursday a week before, the Reddit share closed at $50.44 and peaked at $65.11 on Tuesday this week. However, its decline started this Wednesday, falling approximately 11% to $57.75 at the market close.
That same day in a report cited by Bloomberg News, Hedgeye Risk Management, stated that the Reddit stock is “grossly overvalued”. Besides that, Reddit revealed earlier in the week that its CEO Steve Huffman sold 500,000 shares, which represents a portion of his holdings.
Another Reddit executive who went down this part is COO, Jennifer Wong, who disclosed that she sold 514,000 shares out of 2,000,000 shares in her holdings.
“The move was expected and represents just a fraction of their holdings,” said Ben Silverman, Vice president of research at Verity. “However, there is always a bit of disconnect because the purpose of taking the company public is twofold,”
“It’s not just to generate liquidity for the company itself for expansion and growth; it also enables insiders to cash out to generate liquidity, which is noticeable with the Reddit IPO. But if the prospects are so bright, why are insiders selling and not buying out more?” Silverman added.
