The highly anticipated market debut of Reddit stock has sparked considerable interest among investors, with both bullish and bearish sentiments prevailing in the trading community. However, recent data from analytics firm Ortex has shed light on a significant uptick in bearish activity surrounding Reddit shares in the initial days of trading.
According to Ortex’s preliminary estimate, a substantial portion of Reddit’s free share float—approximately 7.1%—has been subjected to short selling. This heightened level of short interest, particularly for a newly listed stock, suggests a notable degree of skepticism and pessimism among certain market participants regarding Reddit’s future performance and stock price trajectory. Ortex co-founder Peter Hillerberg remarked that such a high volume of short selling is relatively unusual for a company in its early stages of trading, indicating a prevailing negative sentiment among investors.
Short sellers typically engage in borrowing shares and subsequently selling them on the open market with the expectation of repurchasing them at a lower price in the future, thereby profiting from the difference. In the case of Reddit, it appears that some traders are capitalizing on the perceived vulnerabilities or challenges facing the company, driving downward pressure on its share price.
Following its market debut on March 21, during which Reddit shares closed at $50.44—significantly above its initial public offering price—the stock experienced a brief surge in value, reaching a record high of $74.74. However, this upward momentum was short-lived, as Reddit shares subsequently faced a notable downturn, declining by over 20% from their peak.
In addition to the bearish sentiment observed in the stock’s trading activity, the options market has also witnessed a shift in sentiment, with a notable decrease in trading volume compared to previous sessions. While approximately 53,000 Reddit options contracts changed hands during the trading day, signaling ongoing market interest, the overall sentiment appears to lean towards bearish bets. This moderation in bullish activity may be attributed to the recent decline in Reddit’s share price, prompting traders to reassess their positions and adopt a more cautious stance.
In summary, the heightened level of short selling activity, coupled with the decline in Reddit’s share price and the shift in sentiment observed in the options market, reflects the dynamic and evolving nature of investor sentiment surrounding the company’s market debut. As Reddit continues to navigate the challenges and opportunities associated with its public listing, market participants will closely monitor developments and adjust their investment strategies accordingly.