In recent developments, Reddit (RDDT) stock has seen a significant decline of about 19% following its earnings report last week. This comes after a six-month period where the shares had quadrupled. Despite surpassing earnings per share estimates, Reddit’s daily active users fell from the previous quarter due to changes in Google’s Search algorithm, which impacted site traffic.
Reddit’s stock price was $167.25, reflecting a 4.67% drop. The stock experienced a 5% decline on the trading day following the earnings report and has continued to fall over the past week, marking a 19% five-day loss, the largest since April 2024.
Insider Trading and Regulatory Challenges
CEO Steve Huffman and his trust sold approximately $70.5 million worth of Reddit shares recently, marking the largest stock sale by the chief executive to date. Comparatively, Huffman’s largest previous stock sale was 1,400 shares worth $2.8 million on January 31.
Furthermore, Reddit shares declined by 7.5% as the US Federal Trade Commission launched an inquiry into tech platforms’ policies regarding user bans for certain content. Reddit’s policies can ban users for bullying, harassment, or posting explicit and abusive content.
Despite the recent drop, Reddit’s stock remains up nearly 220% from six months ago. We have been drawn to the platform’s increasing advertising revenue and growing partnerships with major AI companies like OpenAI, which utilize Reddit’s data to train their artificial intelligence models.