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.
Don’t forget that r/wallstreetbets is literally drooling in anticipation of being able to short Reddit stock. Unfortunately or fortunately, that sub has enough market power to be force to be reckoned with.
Shorting is a very important and good mechanism to bring prices back down to earth for any stock. Without it, you would see even higher valuation of which ultimately will be corrected to real financials and valuations. Be it one week or one century. And without shorting, there would be even more l people making dumb investments and intimately being bag holders.
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.
I love how they’re blaming redditors instead of spez and his COO selling over a million shares …
They’re not only blaming redditors, looks like at least one Hedge fund:
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%.
There’s been a lot of talk of it being overvalued so it’s not weird that some want to short it.
They will absolutely be sticking to the narrative that this is all WSB’s fault though. It’s a really convenient scapegoat. Remains to be seen if it will actually work though.
Would be very fitting if their own community would bring that stock down.
Wouldn’t blame them after the IPO. Who wants to Create Shareholder Value for free…for someone else?
