Who’s Laughing Now? Snap Crashes, Falls Back To IPO Price

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Snap (SNAP) stock moved back to its IPO price Thursday, as user growth slows and the social-media company is under increasing assault from Facebook (FB).

Snap stock fell 4.9% to 17 in the stock market today, right at the day’s low and matching its initial public offering price.

Snap held its IPO on March 1, pricing shares at 17, with the stock bolting 44% on its first day of trading, then rising 20% the following day to its record high of 29.44. But shares have steadily tumbled since then.

Snap is the owner of Snapchat, a mobile messaging platform with which users can add creative elements to photos and videos. It competes mostly with the Instagram platform of Facebook, which has steadily copied the most popular features of Snapchat.

Snap CEO Evan Spiegel laughed off Facebook competition on the company’s Q1 earnings call after the market close on May 10. But as he was chuckling over Instagram Stories and Facebook’s other cloning efforts, Snap investors watched shares crash on the wider-than-expected loss and weaker-than-forecast user growth.

Snap shares crashed 21.45% on May 11. The stock briefly rebounded but has now tumbled 20% so far in June.

Snap downfall chart

Also looming over Snap is that restrictions will be lifted on about 1.2 billion shares from July 31 to Aug. 31, setting them free for trading and possibly adding concerns about when stock restrictions expire, which could bring volatility to the stock.

IBD’S TAKE: Snap has a low IBD Composite Rating of 19, out of a best possible 99, a rating that combines several proprietary IBD ratings into one measure. IBD focuses on the best-performing IPOs of the past three years in its IPO Leaders column.

Last Friday, Citigroup downgraded the social media messaging company to neutral from buy, which followed a price-target cut by JPMorgan, along with a report that user growth is slowing further in Q2. Meanwhile, short-sellers have placed a $1.2 billion bet that the stock will continue to fall.

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Meanwhile, Facebook closed down 0.3% to 149.80 but closed near session highs and above its 50-day moving average.

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