Snap crackled, plotzed: Social media darling down 80% from IPO high

By Kate Gibson

/ MoneyWatch

What's behind Snapchat's drop in users?

The honeymoon is over for Snapchat parent Snap and investors. Less than two years after one of the hottest tech IPOs in years, Snap's value has nosedived about 80 percent from the peak hit in its first two days as a public company. The latest hit came as another high-level executive departure unnerved investors in the social-media company.

In its heyday, the social media app's popularity with young consumers had investors betting on it as possible heir to Facebook's throne. It didn't take long for expectations to dim, as investors fretted over the competition from Facebook's Instagram app. That helped push shares from a March 2017 high of $29 to under its $17 IPO price four months later.

And that was before Kylie Jenner wiped $1.3 billion off Snap's market value with a tweet calling Snapshot "so sad" last February.

Shares of Snap were down nearly 14 percent on Wednesday, closing at $5.64 a day after the company said in a regulatory filing Chief Financial Officer Tim Stone would be leaving to pursue other opportunities. Stone's departure came less than a year after he signed on with Snap, after spending two decades at Amazon.

"Cause for concern"

"With another executive departure, investors continue to shoot first and ask questions later," said Arthur Hogan, chief market strategist at National Holdings. By Hogan's tally, Stone joins a list of 20 executives to leave Snap since its IPO. "There had been some hope that when Stone started less than a year ago, he would bring with him a focus on shareholder value," Hogan added.

"The fact that the CFO is resigning after just eight months on the job is a cause for concern and marks continued high levels of management departures," Aaron Kessler, an analyst at Raymond James, wrote in a note.

In addition to Stone following other departed top executives, a redesign of Snapshot's platform drew widespread disdain from users, whose numbers have also been in decline.

A bad omen?

Wedbush analyst Michael Pachter said if Stone left Snap "because of an inability to mesh with other management," that could be a bad omen for the company.

In November, Snap disclosed it had received federal subpoenas related to a class action stemming from its IPO. The lawsuit claims investors were misled about Snapshot's user growth ahead of the company going public.

The executive exodus "underscores a spate of challenges the company has faced as it squares off against Instagram and addresses ongoing challenges related to its app redesign," said Cowen analyst John Blackledge.

— The Associated Press contributed to this report.

First published on January 16, 2019

© 2019 CBS Interactive Inc.. All Rights Reserved.

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