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Published: Wed, March 08, 2017
Technology | By Kate Woods

Snap Inc Sheds Post-IPO Gains, Closes At Lowest Level So Far

Snap Inc Sheds Post-IPO Gains, Closes At Lowest Level So Far

The Wall Street professionals who brought Snap to market have a wealth of experience in pricing these things and they have definitely caught the wave in many respects.

That was half the user growth in the final quarter of 2015. They believe that because Snap is tapping the public market, not giving investors a say is unfair as they will be unable to control the company's future or the pay of its executives. Uniquely in modern IPOs, the founders and advisers have chose to sell shares to the public without voting rights. Pivotal Research issued Snap with a "sell" rating last week, valuing the company at $10 per share based on financial estimates for 2017. At the same time, the company also warned that it might never be profitable.

"It's a strong company, but went very far on voting rights", said Max Wolff, market strategist at 55 Capital.

In a report on Snap last week, Wieser pointed to the company's high costs - which include hosting, serving and creating content, as well as sharing revenue with content partners - and its "sub-optimal corporate structure" with relatively inexperienced managers at the helm.

There is too much risk that accompanies investing in a company that is fighting an uphill battle, incurring more losses than gains.

Investors ideally vision Snap to grow like Facebook and not become Twitter.

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Shares in Snap Inc. took a beating Monday, dropping 12% on several downgrades from stock analysts.

Snap now commands a market cap of over $31 billion. "That wouldn't make me successful". Wall Street was certainly whipped into a frenzy. The analyst rated Snap stock at "Reduce" with a $16 price target.

Spiegel and Murphy essentially hold almost all of Snap's Class C shares - the only stock with voting rights. The daily users visit the Snapchat app more than 20 times a day, on an average, and spend over 30 minutes.

Other analysts also agree Snap's IPO spike isn't the best indicator of the company's success in the long run. "That suggests investors are betting Snap's innovative streak will outweigh the growing competition it faces from Facebook, which has moved aggressively into Snapchat products like stories right across its business, from Facebook to Instagram to WhatsApp", said Robert Lang, CEO at social media analytics company Socialbakers.

"Although other US -based companies have publicly traded classes of non-voting stock, to our knowledge, no other company has completed an initial public offering of non-voting stock on a USA stock exchange", the filing said.

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