Some 7% of Reddit’s free share float (or more) has been sold short so far, according to an estimate from the analytics company Ortex cited by Reuters. That’s something the social platform was worried would happen, noting in its prospectus that retail traders in its subreddits (and particularly on r/WallStreetBets) could cause “extreme volatility” in Reddit’s share price. Those Redditors had already signaled in posts that they were planning to short the stock.
Public data revealing short interest positions on Reddit won’t be available until April 9.
Reddit shares fell as much as 11% at market open to a low of $51.52 after an already-bad Wednesday. Bloomberg reports that Wednesday’s decline was in part due to a Hedgeye Risk Management report naming Reddit as a short idea, saying the stock could plummet 50%.
Reddit’s share price in the low $50 range is still well above its IPO price of $34, and even above its impressive first-day closing price of $48, which had investors chattering about the company’s impressive gains.
Shorting a stock does not lower the stock price.
It does if enough people do it. Shorting a stock puts a bunch of sell orders up, and a bunch of sell orders lowers the price.
People not wanting to buy and hold the stock lowers the price.
If everyone wants to short it and no one wants to buy it, then the price will go down.
Not really going down because of the short but lack of demand
Also only temporary because people shorting the stock will eventually have to buy the stock back.
Sometimes at a huge loss. I’d love to short them, but I don’t like the idea of opening myself up to infinite losses.
Yeah I’ve already seen an article talking about squeezing it if it gets too much short action.
Not by itself. But a lot of short interest can indicate that analysts think a stock is overvalued and that does tend to lower the price.