Reddit Stock Burns Down… CEO Says “Calm Down”... Then Dumps $70M and Leaves You Holding the Bag

For a hot second, Reddit stock was basically a top tier meme format… you know the one that continues to pop up on your IG feed, is kinda ridiculous, but somehow making people a ton of money (we live in a crazy world).

Anyways, the stock blasted up 348% over the past year, making bag-holders from the IPO days look like mini Warren Buffetts. But reality has a way of humbling the internet’s scariest platform, and since last week’s earnings, RDDT has dropped 20%, wiping out a chunk of those gains.

Turns out, when a stock runs up nearly 4x in six months, investors start expecting literal miracles. Reddit’s earnings report was solid on paper… EPS beat expectations, revenue was strong, and AI deals with OpenAI were stacking up like pancakes. But then came the bad news… user traffic dipped thanks to Google tweaking its search algorithm.

During the earnings call, CEO Steve Huffman tried to calm the streets by saying Google traffic had "regained momentum." But the market wasn’t buying it. The stock took a 5% hit the next day, then kept dropping, making it Reddit’s worst five-day stretch since April 2024.

What makes it even more dire is that Huffman and his trust dumped $70.5 million worth of shares on Tuesday… his biggest sale yet. Not a great look when your stock is already taking a beating. Before this, his largest sale was just $2.8 million worth of shares in January.

Just when things couldn’t get worse, the Federal Trade Commission decided to jump in. The FTC announced an inquiry into how tech platforms ban or restrict users, which sent Reddit stock tanking another 7.5% in a single day. And since the RFI (Request for Information) didn’t name any specific companies, investors panicked, assuming Reddit was in the crosshairs.

Despite the sell-off, some hedge funds are still bullish. Coatue Management, led by Philippe Laffont (former Tiger Global guy), made a huge gamble on Reddit last quarter, buying up 6.5 million shares worth $1.1 billion… or about 3.6% of its portfolio. So, while Reddit’s stock continues to play “how low can you go,” some big players are still holding on.

Technically, Reddit broke below its 50-day moving average, which is never a great sign. Last time that happened in July 2024, the stock proceeded to drop another 20% before finding a floor. If history repeats, we could be looking at a drop to $150… another 15% down from here. And if that doesn’t hold? Brace yourself for a slide toward $125.

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Stock.News has positions in Google.