The partially open valve would have allowed water to flood the engine room, which may have resulted in a loss of control, causing the submarine to descend below its crush depth of 100m.
The resultant implosion would have killed the crew instantly.
It's not clear why the valve is partially open .
Reardon's great-niece, Marilyn Abernethy welcomed the new findings, which she will add to the family's history.
"We're just so grateful and pleased that they found it – at least we know where they are and their final resting place," said Abernethy, who said a photo of her great-uncle always hung in a family house when she was growing up.
"But we won't know what really happened. It's a bit of a mystery with the valves being open."
A 15-year-old Reardon, nicknamed "Rosy" because of the colour in his cheeks, responded to a newspaper appeal for boys to join the navy in 1907 for service on the training ship, HMS Pioneer.
In 1911, he was posted to HMS Challenger and the following year, having reached the UK, volunteered for submarine training.
Naval historian Gerry Wright, who wrote a book on Reardon called Kaikoura's Submariner, says life on board the early submarines was tough.
Underwater, the air was full of oily fumes. The boats had one bunk, which the three officers shared, while the ratings slept where they could. The men used a bucket as a toilet.
Wright said the new findings end years of speculation as to what happened to the submarine, including rumours about it being sunk by a German gunboat.
"There was no real inquiry done because it was the beginning of World War One and the Australians were learning about how to fight a war. So it was a case of, 'Dead man down, and we'll look into that later'," he said.
A large marble memorial commemorating Reardon was erected in a Kaikoura cemetery after his death.
The monument toppled over and was damaged during the violent magnitude-7.1 earthquake of November 2016.
But the Abernethys commandeered a digger and got the memorial reinstated.
Marilyn Abernethy lays a poppy at her great-uncle's memorial every Anzac Day.
"It's an important part of our family history and perhaps the generations to come will be interested in hearing all about it too," she said.