Reddit shares slump on short report

Good morning. Here's what happened overnight and what you need to know today.

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Reddit reset: Shares in Reddit have tumbled after Hedgeye Risk Management published a report which names the social media stock as a short idea. Hedgeye argues that the stock is “grossly overvalued” and should be trading close to its IPO price of USD34 ($52.11), which would be a 50% slide on its value at Tuesday’s close. Shares in the RDDT stock fell as much as 15% on intraday trading on Wednesday, its lowest level since March 22. The company’s blockbuster NYSE debut early last week saw its shares surge 48% on its first day of trading, reaching gains of 90% in the following days. Hedgeye analyst Andrew Freedman explained that the company “put RDDT on the short bench” in the lead up to the IPO. (Bloomberg)

Correction: An earlier version of this newsletter incorrectly stated that Hedgeye said Reddit stock is “grossly undervalued” rather than "overvalued."

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DJT rising: Shares in Donald Trump’s Trump Media & Technology Group Corp. continued gaining during trading on Wednesday, following a strong Nasdaq debut. Shares in the stock ‘DJT’ were up almost 12% by mid-session, softening an earlier lift which reached 18%, but still adding USD959 million to the company’s value. The stock was one of the most actively traded companies in the US on Wednesday morning, with over 18 million shares changing hands. The performance brings Trump’s personal stake in the company to over USD5 billion. (Bloomberg)

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Catching an L: Tom Hayes, the London trader at the centre of a conspiracy to rig interest rates during the 2008-2009 financial crisis, has lost his appeal of a 2015 conviction which found him guilty of trying to manipulate the London interbank offered rate (Libor). As part of the appeal, Hayes sought to recoup a substantial amount of the £900,000 ($1.74 million) in personal wealth he lost as a result of penalties tied to the case, that the government had argued were the proceeds of crime. Prosecutors alleged that Hayes and a number of other bankers manipulated the key interest rate benchmark (which used to be used to value trillions of dollars worth of loans and securities contracts). At the 2015 trial, Hayes said his behaviour was considered the norm in the industry, stating: “Not even Mother Teresa wouldn’t manipulate Libor if she was setting it and trading it.” (UK Court of Appeal Judgment)(Capital Brief)

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Corporate creatives: Canva’s co-founder and chief product officer, Cameron Adams, told The Information that Canva plans to expand into enterprise sales, and hopes that its purchase of Affinity earlier this week will “accelerate” corporate business. Adams added that the idea behind Canva’s purchase of their UK counterpart means Canva will be “able to offer more value to enterprises and truly meet the emerging needs of their workflows.” About 25% of Canva’s $1.7 billion ARR came from corporate sales in 2023, and the company has looked to hire an enterprise sales chief and add higher-priced subscriptions. The company is set to announce a suite of workplace features at its Los Angeles conference in May, called Create, its first conference outside of Australia. (The Information)

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Trading barbs: US Treasury Secretary Janet Yellen has said that the green energy industry’s ramp up in China is distorting the global economy. Speaking on Wednesday in Norcross, Georgia, for the reopening of a US solar-cell manufacturing facility, Yellen says that China’s increased production across solar energy, electric vehicles and lithium-ion batteries amounts to unfair competition which “distorts global prices” and “hurts American firms and workers, as well as firms and workers around the world.” Yellen plans to convey these views to Beijing on her upcoming visit, stating: “We have raised overcapacity in previous discussions with China and I plan to make it a key issue in discussions during my next trip there.” (Associated Press)

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Open-debate: Databricks’ VP of generative AI, Naveen Rao, has called Sam Altman’s position on open-source artificial intelligence “hogwash,” as the OpenAI challenger launches its own open-source AI model, DBRX. DBRX hopes to compete with the likes of Meta, Google and OpenAI, with what Databricks calls the most powerful and efficient open-source AI model available. In conversation with Capital Brief, Rao criticised Altman’s position that the most powerful AI models should stay closed for the sake of safety, stating: “If you’re really serious about safety, you need to decentralise it,” Rao said in an interview. “The way we create safety in the world is not by [giving control to] one set of people who are somehow more altruistic than everybody else. That’s a bunch of bullsh*t.” (Capital Brief)

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Podium deal: Formula One owner, Liberty Media, is in talks to buy the company that owns MotoGP in a transaction that could top €4 billion. According to sources cited by the Financial Times, Liberty is set to agree to the takeover of Dorna Sports, after beating a rival bid from sports and entertainment group, TKO. The deal would unite the elite car and motorcycle racing series, but is likely to face regulatory scrutiny should it go ahead. CVC Capital Partners once owned both F1 and MotoGP, and was forced to sell the latter in 2006 by EU competition regulators as a condition of buying F1. The €4 billion offer including debt is reportedly close to completion, but the announcement may be pushed into next week. (Financial Times)

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Swiss sale: UBS is planning to sell USD8 billion worth of loans to PE giant Apollo, as it winds down parts of the investment bank tied to its buyout of Credit Suisse last year. Apollo first agreed to purchase Credit Suisse’s securitised products division in 2022 in a deal that included a related investment management contract. The deal helps bolster UBS’ strategy to cut back Credit Suisse’s investment bank and focus on building out wealth management opportunities across the group. “As we execute on our integration plans, this is another example of our relentless focus on working with clients and counterparties to free up capital from Non-Core activities and reducing costs and complexity,” said Sergio P. Ermotti, UBS group CEO. (Financial Times)(UBS press release)