# Reddit Shares Plunge 25% in Two Days as CEO and COO Unload Stock
Shares of Reddit, the popular social network, sharply reversed from their recent gains, dropping 14.6% to $49.32 in New York on July 28, culminating a two-day decline exceeding 25%. The company, which went public on July 21, had initially surged 48% from its IPO price of $34 to close at $50.44 on its first trading day. It has since returned to its starting point after just five trading days.
The downward spiral intensified after Hedgeye Risk Management issued a valuation warning, suggesting a fair value of $34 per share on July 27. Adding to the pressure, Reddit disclosed early this week that CEO Steve Huffman sold 500,000 shares, and COO Jennifer Wong sold 514,000 shares, reducing her holdings to 1.4 million shares.
Ben Silverman, Vice President of Research at Verity, commented on CNBC that insider sales were somewhat anticipated given the IPO’s goals but questioned, “If the outlook is so bright, why are the insiders selling?”
New Street Research maintained its ‘neutral’ rating on Reddit, with a target price of $54. Founded in 2005, Reddit boasted over 70 million daily active users as of October last year.
# Truth Social Parent Slides After SPAC Debut
Trump Media & Technology Group (TMTG), the parent company of Truth Social, saw its shares drop 6.4% following a two-day surge of over 10% post its SPAC merger. On July 26, the company experienced substantial gains of 16% and a further 14% on July 27. Despite Truth Social operating at a loss, strong purchases by Trump supporters were identified as the driving force behind the stock’s initial rise.
In its first nine months last year, TMTG generated less than $4 million in revenue while its current market capitalization stands at $8.4 billion. Bloomberg reported that this has significantly boosted former President Donald Trump’s net worth by $4.9 billion.
Trading under the ticker ‘DJT’, reminiscent of the 2021 GameStop saga that saw a short squeeze driven by retail investors, TMTG has been categorized as a meme stock. Matthew Tuttle, CEO of Tuttle Capital Management, noted, “This is a meme stock, detached from traditional P/E ratios.”
Bloomberg also revealed that Trump is prohibited from selling TMTG shares for six months per current agreements. However, this lockup period could be shortened with board approval, potentially risking the stock’s future value.
Usha Rodrigues, a law professor at the University of Georgia, noted Trump’s legal and financial constraints, indicating he might need the liquidity from stock sales but couldn’t afford a value plunge by offloading too many shares at once.
GameStop, another notable meme stock, tumbled 15% due to poor earnings reports, and fell an additional 5% the following day. Although TMTG’s backdoor listing initially spiked interest in meme stocks, GameStop shares have recently declined.
cool21@yna.co.kr
