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Snap sinks to IPO price
for first time since market debut
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 [June 16, 2017]
By Noel Randewich
SAN
FRANCISCO (Reuters) - Shares of Snap Inc dropped 4.9 percent on Thursday
to their initial public offering price, highlighting investors' loss of
confidence in the social media company that faces fierce competition
from Facebook.
The owner of Snapchat - a mobile app that lets users capture video and
pictures that self-destruct after a few seconds - ended at $17.00, the
price set in its March initial public offering that was the hottest U.S.
technology listing in years.
Snap climbed to $29.44 in the days immediately after its market debut
but has since declined. Thursday's price was the lowest since the IPO
and it did not sink below $17.00.
Snapchat is popular among people under 30 who enjoy applying bunny faces
and vomiting rainbows onto their pictures. But many on Wall Street are
critical of its high valuation and slowing user growth. Snap has warned
it may never become profitable.
Those worries increased after Snap's first quarterly report in May
showed declining revenue expansion, disappointing investors who had
hoped the company would surprise them with big numbers.
Dipping below an IPO price is seen on Wall Street as a setback to be
avoided by chief executives and their underwriters, but it is not
uncommon for Silicon Valley companies whose market listings have been
hyped to investors.
Alibaba slipped under its IPO price 233 days after its stock market
debut while Facebook dipped below its IPO price in its second day of
trading. Facebook is now up nearly 300 percent from its IPO.
Snap's IPO was popular among twenty-something investors, according to
Robinhood, a mobile trading app.
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A woman stands in front of the logo of Snap Inc. on the floor of the
New York Stock Exchange (NYSE) while waiting for Snap Inc. to post
their IPO, in New York City, New York, U.S. on March 2, 2017.
REUTERS/Lucas Jackson/File Photo - RTS1686M
It recently traded at nearly 21 times expected revenue, according to
Thomson Reuters data. By comparison, Facebook has a revenue multiple of
11.6.
Since May, the interest rate that short sellers pay to borrow shares of
Snap has jumped to 42 percent a year, according to Astec Analytics. Some
insiders in Snap's IPO will be free to sell their shares at the end of
July, increasing the supply available to short sellers.
The Advisor Shares Ranger Equity Bear ETF made money selling Snap after
its IPO and buying the shares back after its disappointing quarterly
report.
Portfolio manager Brad Lamensdorf said he would consider shorting Snap
again once more shares hit the market.
"Its price-to-sales ratio is just so freaking high," Lamensdorf said.
(Reporting by Noel Randewich, additional reporting by Ross Kerber in
Boston; editing by Diane Craft and Cynthia Osterman)
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