SNAP had a bad day yesterday, closing at an all-time low of $16.99, going below their original IPO price of $17.00. The development forced their share down additional 1%.
This is kind of a big deal. It means that investors who bought shares at the time of their IPO back in March and didn’t sell them actually lost money, a predicament that’s difficult to rebound from in financial markets.
Making matters worse, Credit Suisse, who once rated SNAP as ‘outperform’ has reduced their target price from $30 to $25 on Monday. One of their analysts, Stephen Ju, explained the price slashing decision saying “while we were hoping for Snap to exhibit a more comfortable growth path, we are reminded that nascent companies sometimes grow in fits and starts”.
Some would argue that Snapchat didn’t deliver the advertising revenue many of its investors were hoping for. However, some of the damage might be contained, at least until the end of the month. That’s because employees and IPO backers who own shares in the company will not be able to sell them until July 29th, due to what’s known as a ‘lock-up period’.
The market sentiment on Snapchat appears to be bullish as both Credit Suisse and Wall Street in general, don’t have a lot of faith in the company reaching its $1 billion goal in advertising revenue. This is significant as it was that same price target that justified their relatively expensive IPO.
Hopefully for SNAP, this drop in share value will be as temporary as the messages their users send to each other. What will really happen though? No one knows for sure.
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