Gainey McKenna & Egleston Announces A Class Action Lawsuit Has Been Filed Against Reddit, Inc. (RDDT)

/EIN News/ -- NEW YORK, June 19, 2025 (GLOBE NEWSWIRE) -- Gainey McKenna & Egleston announces that a securities class action lawsuit has been filed in the United States District Court for the Northern District of California on behalf of all persons or entities who purchased or otherwise acquired Reddit, Inc. (“Reddit” or the “Company”) (NYSE: RDDT) securities between October 29, 2024 and May 20, 2025, both dates inclusive (the “Class Period”).

The Complaint alleges that defendants failed to disclose: (i) changes in Google Search’s algorithm and features like AI Overview were causing users to stop their query on Google Search; (ii) these algorithm changes were materially different than prior instances of reduced traffic to the Reddit website; (iii) Defendants were aware that the increase in the query term “Reddit” on search engines was because users were getting the sought after answer from Google Search without having to go to Reddit, and not because they intended to visit Reddit; (iv) this zero-click search reality was dramatically reducing traffic to Reddit in a manner the Company was unable to overcome in the short term; (v) Defendants, therefore, lacked a reasonable basis for their outlook on user rates and advertising revenues; and (vi) as a result, the Company’s public statements were materially false and misleading at all relevant times.

The Complaint also alleges that on May 19, 2025, Wells Fargo analysts downgraded Reddit’s stock and lowered their price target to $115 per share from a previous $168 per share. The Complaint continues to allege that Wells Fargo called Google Search’s implementation of new AI features as likely “permanent” disruptions on user traffic for Reddit. The Complaint further alleges that the analysts stated traffic to Reddit from Google Search, particularly from from logged-out users in the U.S., is likely to decline as result of the changes. According to the Complaint, the reduction in traffic will ultimately hurt Reddit’s advertising revenue.

The Complaint alleges that investors reacted immediately to the Wells Fargo revelations. The Complaint alleges that the price of Reddit’s common stock declined dramatically. The Complaint continues to allege that from a closing market price of $113.23 per share on May 16, 2025, Reddit’s stock price fell to $107.99 per share on May 19, 2025 (the next trading day), a decline of about 4.2%.

According to the Complaint, on May 21, 2025 Baird analysts substantially downgraded Reddit’s stock, reducing the price target to $120 per share from the previous $140 per share. The Complaint alleges that citing similar concerns as the Wells Fargo analysts, Baird analysts also noted the new developments in Google Search that had just been presented at the Google I/O developer conference. The Complaint alleges that with this confirmation on permanent disruptions to Reddit’s traffic, Baird analysts accordingly “adjust[ed] estimates for ongoing U.S. user growth headwinds.”

The Complaint alleges that investors reacted immediately to the Baird revelations. The Complaint continues to allege that the price of Reddit’s common stock declined dramatically. The Complaint alleges that from a closing market price of $105.64 per share on May 20, 2025, Reddit’s stock price fell to $95.85 per share on May 21, 2025, a decline of about 9.3%.

Investors who purchased or otherwise acquired shares of Reddit should contact the Firm prior to the August 18, 2025 lead plaintiff motion deadline. A lead plaintiff is a representative party acting on behalf of other class members in directing the litigation. If you wish to discuss your rights or interests regarding this class action, please contact Thomas J. McKenna, Esq. or Gregory M. Egleston, Esq. of Gainey McKenna & Egleston at (212) 983-1300, or via e-mail at tjmckenna@gme-law.com or gegleston@gme-law.com.

Please visit our website at http://www.gme-law.com for more information about the firm.