Reddit, the social media platform, is witnessing a dramatic downturn in its shares following a surge post its IPO last week. The shares closed Thursday at $49.30, dropping below their initial closing price on the first day of trading on the New York Stock Exchange. The decline marks a significant setback for the company, which had initially seen a promising start in the market.

The downward trend started on Wednesday, with shares plummeting by approximately 11% to $57.75 at market close. Analysts attributed this decline to concerns about the company’s valuation, with Hedgeye Risk Management labeling Reddit’s stock as “grossly overvalued” in a report.

Adding to the apprehension, Reddit’s CEO Steve Huffman and COO Jennifer Wong both disclosed substantial sell-offs of company shares earlier in the week. Huffman sold 500,000 shares, while Wong divested 514,000 shares. Despite attempts to assuage investor concerns, such moves have raised questions about the company’s outlook and the motives behind insider selling.

The week had begun on a positive note for Reddit, with shares soaring by 30% on Monday and further rising by 8.8% on Tuesday. However, even as optimism initially prevailed, concerns about the company’s long-term prospects have now cast a shadow over its performance in the market.

Analysts anticipate continued volatility in Reddit’s stock, particularly leading up to its first earnings report. Amidst the uncertainty, investors are closely monitoring developments, mindful of the potential implications for their portfolios.

The fluctuating fortunes of Reddit serve as a reminder of the inherent risks in the stock market, particularly in the realm of newly public companies. As the company navigates these turbulent waters, stakeholders await further clarity on its future trajectory and the factors influencing its stock performance.