Reddit (RDDT, Financial) just dropped a plot twist that's shaking up Wall Street. After skyrocketing 16% on Thursday to $158, fueled by Piper Sandler's Thomas Champion raising his price target to a record $150, the stock hit turbulence. Late Thursday, news broke that Advance Magazine Publishers, one of Reddit's largest shareholders, is offloading a $1.2 billion stake—sending shares sliding over 7% in after-hours trading.
But wait—there's more. Advance isn't completely stepping away from Reddit. The Newhouse family-backed company is hedging its bets by buying derivatives on the shares they're selling, allowing them to keep an indirect grip on their ownership while setting up a credit facility. Talk about playing both sides. Meanwhile, Reddit's story remains compelling, with its stocks being multi-baggers within six months, then analysts like Champion are bullish on its revenue and EBITDA growth potential, thanks to clever ad monetization strategies and increased user engagement.
For investors, though, this dual narrative is a head-scratcher. Is the sale a smart liquidity move or a warning sign of overvaluation after a 300% rally since its IPO in March? With Reddit's valuation climbing and the stock flirting with overbought levels, the stakes couldn't be higher. Reddit might be riding a wave of innovation and market share growth, but this sudden shake-up has investors wondering if the honeymoon phase is officially over—or just getting started.
