The Reddit IPO: too good to be true?
Reddit’s IPO on March 21, with a launch price of $34 (the high end of the range) was apparently a success: they briefly traded amid great euphoria at $50.44, up 48%.
However, things may not be what they seem. Some of us had already warned that Reddit had reached its high water mark, and now analysts such as New Street Research or Hedgeye are striking a note of caution, which coupled with the speed that many of the company’s management team have since sold their shares, has triggered a 50% fall in the share price, which has now fallen below the initial price.
Reddit CEO Steve Huffman sold half a million shares, almost 40% of his stake, and the COO sold another 514,000, which is an even larger percentage. This sudden increase in the supply of shares in a newly listed company logically sent the price tumbling, and also illustrates a huge disconnect between management and the objectives they state in their supposed strategy: why sell so many shares if the prospects are as bright as they say they are?
