Reddit Inc. is facing a turbulent period as its stock price has dropped significantly following news that Advance Magazine Publishers Inc., a major shareholder, plans to establish a credit facility using its stake in the company. Advance, part of the Newhouse family publishing empire that owns Conde Nast, is reportedly offering 7.8 million shares valued between $145.38 and $148.54 each, potentially raising up to $1.2 billion. This move represents a discount of up to 8% from Reddit's closing price of $158.02 on Thursday.

The announcement has led to a sharp decline in Reddit's stock, which fell as much as 9.6% on Friday, reducing the company's market value to approximately $26 billion. The decision to create a credit facility comes after Reddit's stock has seen a remarkable increase of over 300% since its IPO in March, which raised $860 million. Reddit has benefited from the growing interest in artificial intelligence, licensing its data to train AI models, alongside other tech companies like Arm Holdings Plc and Astera Labs Inc.

In addition to the financial maneuvering, Reddit faced technical challenges this week with an outage caused by an HTTP error, which was resolved later. Despite these issues, technical analysis suggests that Reddit's stock maintains strong support, trading above its eight, 20, and 50-day simple moving averages, indicating a bullish trend. However, the stock's relative strength index of 79.18 suggests it is overbought, which could lead to further volatility.

Analysts have mixed views on Reddit's future, with a consensus price target of $92.84, indicating a potential downside. Piper Sandler recently upgraded Reddit, citing strong user growth metrics, which could make the stock attractive in the long term. However, the current market conditions and the impact of Advance's stake sale could pose challenges for Reddit in the near future.