Brief: Snap shares drop to IPO price

Snap has released its first quarterly results since its March IPO. Credit: Anthony Quintano (CC BY 2.0)

The news:

• Shares in Snap – the company behind Snapchat – yesterday fell to their lowest price since its debut on the New York stock exchange back in March.
• Snap stock opened at US$17 per share at its IPO on March 2, and began trading at US$24 before rising to an all-time high US$27.09 the following day. The fall back to US$17 represented a 37 percent drop from that point.

Why it matters:

• The fall followed Snap’s first-ever quarterly results as a publicly traded company. In the results reported last month, the company notched up a 286 percent increase in year-on-year revenue, but its quarterly income and user growth were substantially lower than expected.
• A disappointing share price fall on this scale is not necessarily a portent of worse things to come. Facebook also saw its stock fall close to IPO value little over a year after its flotation, and it has rebounded signficantly to reach its current price.
• Nevertheless, Snap’s drop to its IPO price only a few months after float will set alarm bells ringing for many investors, as the prospects of the company being seen as a major tech growth stock – like the FANGs (Facebook, Amazon, Netflix, and Google) – will be diminished.

Source: TechCrunch.