For some reason, the Reddit automated filters removed my other attempt at this post... I guess that's the icing on the cake to the loss.... Hoping this post actually sticks... Well, fuck. Yesterday, I posted my $10 million RDDT YOLO ahead of earnings. I said you degenerates would either get to watch me make a fortune or enjoy some premium loss porn. Congratulations. You got the loss porn. And holy shit, did I deliver. Roughly $5 million gone in one earnings report. If there's *any* positive, it's that a lot of the holdings are shares vs being fully options. But again, that's a *super minor* positive. As for the total gain loss column not being shown on the main RDDT shares and some of the $200 short puts, it's because Fidelity has this fucking annoying thing where if the position changes that day before market opens, then the total G&L doesn't update until the next day. You can still see the values and the today G&L though. First things first: I was wrong To everyone who warned me this was a terrible idea, congratulations. You called it. Some of you made legitimate arguments, some just called me a regard, and apparently both groups were right. Credit where credit is due. I'm not going to disappear, delete my original post, or pretend this didn't happen. I posted the trade publicly before earnings, knowing full well I might get absolutely destroyed. And here we are. Was this just a blind gamble? No. It was a calculated risk, and one I went into with my eyes wide open. I've spent hundreds of hours researching Reddit's business, financials, competitive position, growth trajectory, and valuation. My thesis was based on strong revenue and earnings growth, expanding margins, minimal capex, billions in cash, and what I believed was an unusually low valuation relative to its growth prospects. I was swinging for a home run. I've been fortunate enough to build substantial wealth through the sale of a business I co-founded and then grew that significantly over the years through investing and trading. I saw this as an opportunity to potentially take it to the next level. I deliberately positioned myself to go big on this one. I understood the risks, knew I could take a massive hit if I was wrong, and accepted that possibility before placing the trade. Even in a worst-case scenario, I knew I'd be financially okay. That doesn't make the loss any less painful, but it does mean this wasn't money I couldn't afford to lose. So what actually happened? Reddit reported 53% revenue growth, 75% EPS growth, 91.5% gross margins, and 98% free cash flow growth. Those are objectively strong financial results. But DAU growth slowed to 12%, and Q4 revenue guidance disappointed. I won't sugarcoat it. I was disappointed by the Q4 guidance myself. Reddit also announced plans to transition toward requiring users to log in, partly to protect its data from unauthorized scraping and improve monetization. I believe that makes strategic sense long term, but it will likely create additional friction for user growth in the near term. Beyond that, I underestimated the impact of Google's search changes on Reddit's traffic. Management made clear that the decline in search referrals is meaningful, and I didn't give that risk enough weight in my thesis. They also warned that DAUs could decline by double digits sequentially in Q4 if current trends persist. That's a substantially larger near-term headwind than I anticipated, and something I clearly underestimated in my analysis. What I genuinely didn't anticipate was RDDT getting beaten down to approximately 20.6x trailing earnings and 14.2x projected 2027 earnings (based on pre-earnings consensus), while still delivering revenue growth of 40%+ YoY, producing 91.5% gross margins, generating $363 million in quarterly free cash flow, and sitting on over $3 billion in cash with virtually no debt. I believed the already compressed valuation provided meaningful downside protection. Clearly, I was wrong about how much further the market was willing to compress that multiple. I can still believe Reddit is an attractive long-term investment while acknowledging that my earnings trade was a spectacular failure. Those two things aren't mutually exclusive. Am I okay? Yes. Financially, I'll be fine. But don't confuse being able to absorb a loss with being indifferent to it. Losing millions of dollars fucking sucks. What's next? I'm going to continue evaluating Reddit based on its actual business performance, not my cost basis or how badly I want to be proven right. If the thesis materially deteriorates, I'll change my position. If the fundamentals continue supporting the valuation, I'll evaluate it accordingly. The market doesn't owe me a recovery, and being convinced I'm right doesn't make me right. What I plan to do with the positions I plan to close out the short puts that expire today, and I'll probably reduce my share count somewhat over the next couple weeks. I still intend to maintain a substantial share position because even after reassessing the earnings and guidance, I believe the current valuation is too low relative to the company's fundamentals and growth potential. I'm not trying to convince anyone else to buy or hold RDDT. I'm simply explaining what I intend to do and why. I posted my YTD realized gains showing what I'll use to tax loss harvest against. I'll be targeting the short term losses against the short term gains. The long term gains I'll leave in place. Final thoughts Nobody bats 1.000 in investing. I've had some massive wins over the years and some big losses with this one being the largest and most painful I’ve experienced. I took a calculated risk, swung for the fences, and struck out. To the bears, enjoy your victory lap. You've earned it. To everyone who offered genuine encouragement or constructive criticism, I appreciate it. And to everyone who just came for the loss porn… I hope what you see in the screenshots covers what you were looking for. I still enjoy Reddit so much and spend a considerable amount of time on here. I enjoy the discussions, even the light jabbing we give each other. As much as we complain about the community on Reddit, I actually love it. That's probably one of my blindspots with my thesis is due to how much I enjoy Reddit myself. In any event; I'm still here (though very humbled now), and I still appreciate you all!   submitted by   /u/imacompnerd [link]   [comments]