Securities Class Action Lawsuit Filed Against Reddit, Inc.

Strategic Insights -

Gainey McKenna & Egleston has announced a securities class action lawsuit on behalf of all persons or entities who purchased or acquired Reddit, Inc. securities between October 29, 2024, and May 20, 2025. The lawsuit alleges that Reddit's public statements were materially false and misleading due to changes in Google Search's algorithm and features, which reduced traffic to the Reddit website. As a result, Reddit's advertising revenue was negatively impacted. The lawsuit also highlights the negative impact of the changes on Reddit's stock price, with a decline of 4.2% and 9.3% after the announcements by Wells Fargo and Baird analysts, respectively.

Key Takeaways:

  • The lawsuit alleges that defendants failed to disclose changes in Google Search's algorithm and features, which reduced traffic to the Reddit website.
  • The changes in Google Search's algorithm and features were material and different from prior instances of reduced traffic to the Reddit website.
  • Defendants were aware that the increase in the query term "Reddit" on search engines was not due to users intending to visit Reddit, but rather because they were getting the answer from Google Search.
  • The zero-click search reality was dramatically reducing traffic to Reddit in the short term, and defendants lacked a reasonable basis for their outlook on user rates and advertising revenues.
  • The lawsuit alleges that investors reacted immediately to the Wells Fargo and Baird announcements, with a significant decline in the price of Reddit's common stock.
  • The decline in traffic will ultimately hurt Reddit's advertising revenue, and the company's public statements were material and false.
  • The lawsuit highlights the importance of transparency in financial statements and the potential consequences of failing to disclose material information.

Statistics:

  • The lawsuit covers the period from October 29, 2024, to May 20, 2025.
  • The stock price of Reddit's common shares declined by 4.2% after the announcement by Wells Fargo, from $113.23 to $107.99.
  • The stock price of Reddit's common shares declined by 9.3% after the announcement by Baird, from $105.64 to $95.85.
  • The lawsuit alleges that the reduction in traffic will ultimately hurt Reddit's advertising revenue.
  • The complaint alleges that from a closing market price of $113.23 per share on May 16, 2025, the company's stock price fell to $95.85 per share on May 21, 2025.

Sources:

  • "Gainey McKenna & Egleston Announces Class Action Lawsuit Against Reddit, Inc."
  • "Securities Class Action Lawsuit Filed on Behalf of Reddit, Inc. Investors"
  • Gainey McKenna & Egleston website (www.gme-law.com)