Snap Inc. Stock Falls Below IPO Valuation

For the first time, Snap Inc. (NYSE:SNAP) stock has fallen below its IPO price of $17. Snap’s stock price fell to an all-time low of $16.99 at market close on Monday. The maker of Snapchat went public in March.

The fall means all the investors who bought the app company’s stock at its market debut have officially lost money. Snap’s stock opened its first trading day at $24. Investors were enthusiastic about a company popular with young people for sending fun photo and video messages that disappear. The next day saw an additional 11 percent climb that brought the shares to their all-time high of $27.09.

Snap investors were disappointed with the company’s first public earnings report in May. Those results missed analysts’ expectations by a long shot and Snap’s stock tumbled 25 percent in just minutes. The company will disclose how much it made in revenue last quarter when it next reports earnings later this summer.

Snap has shed more than $10 billion in stock market value since its IPO, with its valuation now at about $20 billion after once topping $31 billion. The stock briefly touched the $17 threshold in mid-June. Though the company has yet to make a profit, Snap stock trades at more than 20 times estimated 2017 sales.

Many of Snapchat’s IPO backers are currently prohibited from selling the stock during its lock-up period, but the expiration of those restrictions is less than three weeks away. The lifting of trading restrictions is expected to start pushing the number of shares eligible for sale to about five times the amount currently available. If those IPO shareholders decide to sell the first chance they get, the value of the company’s shares could plunge after July 29.

Some insiders and pre-IPO investors will also be eligible to sell their stakes on that date. Some investors who bought Snap stock since its IPO and were not bound by the lock-up period have already decided to sell off their shares. It’s unclear if any Snap executives or venture capital backers plan to sell.

Falling below an IPO price for the first time is a common occurrence. It is estimated that half of publicly traded companies fall below their initial price for extended periods. It happened to Facebook, Twitter, Tesla, and Fitbit after their IPOs.

Snapchat currently reports 166 million daily users of its service. To regain value, the company will need to keep innovating on its product as Facebook copies its most popular features. However, Snapchat’s ability to grow and attract advertising dollars is in doubt. A new platform designed to make it easier to buy ads on Snapchat has had its rollout delayed for unspecified reasons.

 

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