Snoo may not be smiling anymore. Reddit’s share price continued to drop significantly on Thursday as short-sellers made moves on the newly-public company.
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’s conservative counterpart Rumble is falling, too
Rumble, another big social media site — albeit with a more politically conservative user base than Reddit and a smaller market cap — also saw its shares fall considerably in morning trading Thursday. Rumble’s stock dropped more than 5% to $8 after a big rally on Tuesday. The initial pump-up came after its CEO made comments on Fox News about Rumble’s business relationship with Trump Media & Technology Group, which owns Truth Social.
Rumble is still up more than 80% year-to-date after big losses at the end of 2023. But like Reddit, its gains early this week are being erased.