Are We Seeing the Death of Reddit Stock Already?

Reddit may be new to the stock markets, but the company is already seeing how unforgiving it can be. The stock price is down 12% for Thursday afternoon.

Reddit’s stock fell to $50.83 per share after it had climbed to $73.47 on Tuesday. The company is suffering from the frenzied trading of short sellers as the market heats up heading into the holiday weekend.

Reddit’s price has been falling for several days now in what may continue into next week if the trend keeps up. The free share float of Reddit stock has been selling short- about 7% of it so far, says analytics firm Ortex.

The stock markets closed up on Wednesday, so Reddit’s fall was not part of a larger market trend. This stock may continue to operate mostly independently and be subject to the whims of its very vocal investors who are making their trading sentiments known on Reddit forums, called subreddits.

What Is Causing Reddit Stock Volatility?

Analysts put down the trading instability to Reddit’s forums. There, controversial topics are constantly posted, often getting Redditors in trouble and making the site seem like a hotbed of extreme views. There are also many subreddits about shorting the stock and trying to drive the price of stock down.

The stock fared poorly on Wednesday and continued to drop on Thursday. The fall was partially attributed to a report from Hedgeye Risk Management that said that Reddit stock could fall off a cliff very soon.

It should be noted that Reddit stock is much higher than it started out, and its roughly $50 price point for Thursday is well above the IPO price point of $34 per share. The stock sold well initially, but it is becoming volatile quickly, which could make this one of the riskier Wall Street investments in the short term.