Hedgeye Claims Reddit is ‘Grossly Overvalued’, Insiders Sell Shares After IPO
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Hedgeye Claims Reddit is ‘Grossly Overvalued’, Insiders Sell Shares After IPO

Reddit's stock has experienced significant volatility following its IPO.
Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

Reddit Inc. (NYSE: RDDT) has made headlines since its blockbuster IPO, but only some of the attention has been positive. The social media giant’s stock has experienced significant volatility, with insider trading and overvaluation concerns taking center stage.

As top executives, including CEO Steve Huffman, CFO Andrew Vollero, and CTO Christopher Slowe, sell substantial amounts of stock, questions arise about the company’s future performance.

Meanwhile, Hedgeye Risk Management has labeled Reddit as a potential short idea, suggesting that the stock is grossly overvalued and could face a 50% downside. As the market digests these developments, Reddit’s stock price has dropped 7.74% to $53.28 at 9:36 a.m. EDT.

Reddit Stock Sees Significant Insider Trading After Blockbuster IPO

Reddit’s top executives have engaged in significant stock transactions since the social media firm’s public debut, with CEO and President Steve Huffman leading the charge.

Huffman sold 500,000 shares at an average price of $32.30, resulting in a transaction valued at approximately $16.15 million. Following the sale, Huffman directly owned 710,306 shares, indicating that the transaction represented about 41.3% of his total holdings.

Chief Financial Officer Andrew Vollero and Chief Technology Officer Christopher Slowe also participated in the selling spree. Vollero offloaded 71,765 shares at the same average price as Huffman, generating roughly $2.32 million from the sale.

After the transaction, Vollero retained 681,660 shares directly, marking the sale as approximately 9.5% of his total shares. Meanwhile, Slowe sold 185,000 shares at $32.30 each, totaling approximately $5.98 million, representing a significant portion of his combined direct and indirect holdings of 443,752 shares.

On the buying side, Chief Accounting Officer Michelle Marie Reynolds and Director Robert A. Sauerberg made notable purchases. Reynolds acquired 3,000 shares at $34 each, totaling $102,000, which adjusted her direct holdings to 96,413 shares. Sauerberg also invested an additional $340,000 in Reddit, purchasing 10,000 shares at $34 each, bringing his post-transaction direct and indirect holdings to 57,087 shares.

Hedgeye Names Reddit as a Short Idea, States Stock is “Grossly Overvalued”

Hedgeye Risk Management has identified Reddit Inc. as a potential short idea, suggesting the stock could face a significant downside of approximately 50%. In a recently released report, the firm characterized Reddit’s stock as “grossly overvalued” and argued that it should trade closer to its initial public offering (IPO) price of $34.

Hedgeye analyst Andrew Freedman expressed concerns about Reddit’s future performance despite the stock’s initial positive trajectory following its IPO. Freedman pointed to the potential for revenue and user growth deceleration in the latter half of 2024 and the first half of 2025 as key factors contributing to the firm’s bearish outlook on the social media platform’s stock.

Reddit Inc. saw a significant drop in its stock price, with shares trading at $53.28 as of 9:36 a.m. EDT, down $4.47 or 7.74% from the previous close.

Do you think Reddit’s stock is overvalued? Let us know in the comments below.

Disclaimer: The author does not hold or have a position in any securities discussed in the article.