The stock of Snapchat’s parent company has dropped 11% to as low as $21 a share, sending the earliest traders who bought at last week Thursday’s debut deeper into the red on their investment.
None of the analysts who initiated coverage of the stock were bullish. Six rated “sell,” and the other two rated “hold.” Some analysts who are part of firms that worked on the initial public offering are not immediately able to rate the stock.
The stock popped 44% on Thursday, its first day of trading, after the company raised $3.4 billion in the IPO – the largest for a social network since Twitter. Its market value rose to $28.3 billion, surpassing companies like Macy’s and American Airlines.
Analysts who are bearish on the stock argue that this valuation is too high for a company that has not yet turned a profit and is competing for ad spending with peers like Facebook.
Additionally, Snap was the first US company to list shares with nonvoting rights. For this reason, a group of investors has approached stock index providers including S&P Dow Jones Indices to prevent Snap from being part of their benchmarks, Reuters reported.
Short selling – used by traders to bet and profit on a stock’s decline – may further pressure Snap shares.
- Markets Insider