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.
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.