Reddit wobbles after HedgeEye calls it a short and sees a 50% drop

(Bloomberg) — Shares of Reddit Inc. posted their biggest one-day decline since the social-media company’s trading debut after HedgeEye Risk Management issued a report adding it to a short opinion and said It was said that there should be a decline of about 50%.

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The stock slipped 11% to $57.75 a share at the end of the trading session on Wednesday, its lowest closing level since March 22. Reddit shares have been on a tear since the company’s March 21 initial public offering, rising more than 90% year to date. closed at a high of $65.11 on Tuesday.

But according to HedgeEye, the stock is “significantly overvalued” and should trade close to its IPO price of $34 – which represents a nearly 50% decline from Tuesday’s close.

Reddit declined to comment.

HedgeEye analyst Andrew Friedman wrote that the firm had Reddit on its “short bench” heading into the IPO, but he believed it would be too volatile to actively short in the early days of trading.

“The deal was oversubscribed, the float was small, the valuation range looked reasonable, and they timed the IPO with easy comparisons, where the company as a public company was up in revenue and user growth in the first quarter right out of the gate. “Is going to accelerate,” Friedman added.

Still, the warm reception that public markets have given Reddit reflects investor enthusiasm for all things artificial intelligence, which was at the center of the company’s IPO. Reddit’s public offering in 2024 is the fourth-largest on a US exchange and a positive sign for technology companies that have put their offering plans on hold in recent years.

Read More: Reddit, Galderma fire IPO starting gun. Now investors want more

The company is expected to report its first-quarter 2024 results in late May. Friedman expects its first report as a public company to show “fundamental…

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