- Reddit has attracted a large number of short-selling bets on the site in the first few days after its IPO.
- Ortex co-founder Peter Hillerberg believes “This is very high for a stock that just started trading, and is an indication that some market participants have a negative view of the future price of Reddit.”
- Short sellers aim to profit by selling borrowed stock and then buying it back at a lower price.
Data from analytics company Ortex on Wednesday showed shares of the social media forum Reddit have attracted a large number of short-selling bets on the site in the first few days after its IPO.
Reddit’s stock sells out in bulk
Based on 2.15 million Reddit shares out on loan, at least 7.1% of the company’s free share float has been sold short, according to a preliminary Ortex estimate.
Ortex co-founder Peter Hillerberg states “This is very high for a stock that just started trading, and is an indication that some market participants have a negative view of the future price of Reddit.”
Also read: Reddit receives FTC inquiry on AI-related deals ahead of IPO
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Stock prices fall
Short sellers aim to profit by selling borrowed shares and buying them back later at a lower price.
On Wednesday, Reddit shares fell 12% to $56.91, snapping a two-day streak of gains.
Reddit shares closed at $50.44 on its first day of trading on 21 March, 48% above its initial public offering price. On Tuesday, the stock is off more than 20% from its record high of $74.74 hit.
In the options market, the frenzied trading since the IPO cooled off as falling share prices prompted traders to cut back on bullish bets.
According to Trade Alert data, around 53,000 Reddit options contracts had changed hands by 1:30 p.m. Eastern Time, with sentiment leaning toward bearish bets.
