Reddit’s stock briefly pumped yesterday after an old news article resurfaced — it’s deeply in the red today
An old Reuters article about a Reddit-Google partnership sent RDDT sharply higher yesterday.
With Reddit’s stock down ~50% since its early February peak, investors in Reddit haven’t had much to celebrate in the last month or so, as the AI momentum reversal has wrecked many of the highest-flying stocks of 2024.
But for a brief moment yesterday, traders sprung into action to bid up the stock, with Reddit breaking out of its market malaise and shares surging ~12% from 2:45 to 3:05 p.m. ET.
The apparent catalyst? A partnership with none other than Google, with numerous outlets running with a headline — Google expands Reddit partnership — that appears to have originated on Reuters, detailing how Reddit will be able to “use Google’s Vertex AI.” The only problem is that the news was more than a year old. A blog post from Google’s website dated February 22, 2024, confirms the details that many of the syndicated versions of the piece — such as this one, which remains on MSN — discussed.
Within about an hour the stock had soared ~12% higher before promptly giving up all the gains, and retail traders, writing on Reddit, weren’t happy:
Reuters itself appears to have withdrawn the article entirely, with a piece in its place that reads:
“March 17 (Reuters) - A story on Google expanding its partnership with Reddit was based on outdated information and has been withdrawn.
There will be no substitute.”
So, why is Reddit getting hammered again this morning? There are a few possible reasons:
Reddit is strongly correlated with the “risk-on momentum trade” in Big Tech stocks. With the market down, led lower by names like Meta and Tesla, Reddit is coming under pressure.
Unfavorable analyst coverage: according to Barron’s, Redburn analysts launched coverage of the social networking site on Monday with a sell rating and a price target of $75.
Comments made by the company’s CEO last week, which implied that it was more valuable to use its data internally than license it to Google or OpenAI. Part of some investors’ bull theses on the stock was that it would continue to sign lucrative AI licensing deals.
