Since its 2017 IPO, Snap's shares have declined 13% on average, annually. It might be time to rethink the company's future. Too bad for shareholders, boss Evan Spiegel has almost complete control. jennifersaba
NEW YORK - Snap’s value is disappearing almost as quickly as its messages. The $16 billion social media company said on Tuesday that revenue declined in the second quarter, wiping almost a fifth off its market capitalization. Since its initial public offering in 2017, shares have declined 13% on average, annually. It might be time to rethink Snap’s future. Too bad for shareholders, boss Evan Spiegel has almost complete control.
It wasn’t always this way – and it doesn’t have to continue. Snap had for a while managed to far outpace Meta Platforms’ revenue growth, having quadrupled its top line since the end of 2018 through 2022, while sales at Mark Zuckerberg’s $755 billion giant, which reports earnings Wednesday night, have about doubled. The problem is that Spiegel hasn’t yet figured out a viable business model, and that’s become a much bigger problem in a more competitive advertising market.
Spiegel might chalk the company’s valuation degradation up to a more measured stock market, and there’s something to that. When the then 26-year-old co-founder brought Snap public, the company, whose deal was 10 times oversubscribed, had promises of being the next Facebook. The same year companies like online food delivery startup Blue Apron were getting a huge reception. That was bound to – and has – subsided.
The trouble is that Snap failed to return even the bare minimum. Take its IPO price of $17 a share and assume that equity investors expect a return of around 15% a year, slightly higher than Meta’s 13% over the same period. Snap’s shares should be worth some $37, or $60 billion overall. The California-based company needs a new blueprint, and a sale might be in the cards. The trouble is Spiegel controls it through voting shares and has since it went public. Snap shareholders can’t wail if they are ghosted.Snap said on July 25 that second-quarter revenue fell 4% year-over-year to $1 billion. The social media company reported a net loss of $377 million compared to a net loss of $422 million in the same period last year.
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