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On Monday the 25th, Reddit shares were trading between ~$49 and ~$59. The stock has not yet dropped below the initial price of $34.
Can somebody explain why these shares may have been sold below market value?
There's a bunch of trades which happen instantly when you IPO. I don't know exactly how it works, but I think that when my company went public the pool offered in the IPO included stock from priority shareholders. So I'm guessing he effectively sold them to reddit at slightly below initial offer value for them to release to the public as part of the IPO. This way he doesn't tank the stock by selling off 500k shares on the stock exchange.
You're exactly right, he sold off all his class a shares as part of the ipo, though he still retains 4.1 million class b shares that have greater voting rights. You can see who sold shares as part of the ipo with the sec filings:
https://www.sec.gov/Archives/edgar/data/1713445/000162828024011448/reddit-sx1a2.htm#i1b9a579e78a34dfa99f7f26daeec195b_100
In the table there in the middle you can see how many class a shares were sold as part of the ipo and where they all came from, 500,000 were from huffman. So all the people in the table there sold at the ipo price (or they were new shares created by the company to raise money), they were not sold at the price it was later trading at in the open market. They were already bought by then as part of the ipo. He wouldn't have been able to do that anyways, I see a lockup period of 180 days listed.
He borrowed money on Reddit's books. Reddit used that money as part of the IPO. Then he sold his shares, and got his hands on the now clean cash money. Reddit is left with the debt? Is this about right?