As stock declines, short traders target Reddit shares.


Reuters, New York City – In its first few days of trading, Reddit stock’s phenomenal market debut has attracted substantial wagers against the social media platform, according to data released on Wednesday by analytics company Ortex.

A preliminary assessment from Ortex indicates that at least 7.1% of the company’s free share float has been sold short, based on 2.15 million Reddit shares that are out on loan.

“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,” Peter Hillerberg, co-founder of Ortex, stated.

By selling borrowed shares and later purchasing them back at a reduced price, short sellers hope to make money.

Reddit’s stock dropped 12% to $56.91 on Wednesday, ending a two-day upward trend. Reddit shares finished at $50.44 on March 21, 48% more than the price of its initial public offering, on the day of its market debut.

The stock has dropped more than 20% from Tuesday’s record high of $74.74.

Since the IPO, the options market has seen frenetic trading, but this has partially subsided as traders have moderated their optimistic wagers in response to the retreating shares.

By 1:30 p.m. ET (1730 GMT), almost 53,000 Reddit options contracts had exchanged hands, with sentiment skewed towards bearish wagers, according to Trade Alert data. 82,000 contracts were expected to be traded today, a decrease from Tuesday’s 131,000 contracts.

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