Core Viewpoint - A securities class action lawsuit has been filed against Reddit, Inc. for failing to disclose significant changes in Google Search's algorithm that adversely affected user traffic and advertising revenues during the class period from October 29, 2024, to May 20, 2025 [1][2]. Group 1: Allegations of the Complaint - The complaint alleges that Reddit's management did not disclose that changes in Google Search's algorithm, including new AI features, were causing users to stop their queries on Google Search, leading to reduced traffic to Reddit [2]. - It is claimed that the management was aware that the increase in the search term "Reddit" was due to users finding answers directly on Google Search, rather than intending to visit Reddit [2]. - The complaint states that the zero-click search phenomenon was significantly reducing traffic to Reddit, which the company could not overcome in the short term [2]. - As a result, the complaint alleges that the company's public statements regarding user rates and advertising revenues were materially false and misleading [2]. Group 2: Analyst Downgrades and Stock Price Impact - On May 19, 2025, Wells Fargo analysts downgraded Reddit's stock, lowering the price target from $168 to $115 per share, citing that new AI features in Google Search would likely cause permanent disruptions to user traffic [3]. - Following the Wells Fargo downgrade, Reddit's stock price fell from $113.23 on May 16, 2025, to $107.99 on May 19, 2025, representing a decline of approximately 4.2% [4]. - On May 21, 2025, Baird analysts also downgraded Reddit's stock, reducing the price target from $140 to $120 per share, echoing concerns about the impact of Google Search's new developments on Reddit's traffic [5]. - After the Baird downgrade, Reddit's stock price dropped from $105.64 on May 20, 2025, to $95.85 on May 21, 2025, a decline of about 9.3% [5].
Gainey McKenna & Egleston Announces A Class Action Lawsuit Has Been Filed Against Reddit, Inc. (RDDT)