Snap, the “camera company” whose business consists almost entirely of ads sold in the Snapchat app, has gone from Wall Street wunderkind to an IPO disaster.
On Wednesday, Snap shares were down 1.4% in morning trading, to $15.26 per share at 11:05 a.m. ET. That’s 10% below the company’s $17 initial public offering price. Snap’s market now stands at about $16.4 billion, down by almost half — around $15 billion — from its peak of $31.4 billion the day after its IPO in March.
The continued slide comes after Snap’s stock fell 10.1% on Tuesday, following a downgrade by analysts at Morgan Stanley — one of the firm’s lead IPO underwriters — which cut their price target from $28 to $16 per share. The firm lowered its rating on Snap from “overweight” to “equal weight.”
“We have been wrong about Snap’s ability to innovate and improve its ad product this year,” the Morgan Stanley analyst team, led by analyst Brian Nowak, wrote in a research note. “Snap’s ad product is not evolving/improving as quickly as we expected and Instagram competition is increasing.”
Snap investors got more discouraging words Wednesday from WPP chief exec Sir Martin Sorrell, who said in a CNBC interview that Facebook has “very successfully” copied Snapchat’s best ideas.
“If you went to the app developers’ conference on the West Coast, at Facebook, the people who I spoke to came away from that saying that Facebook was very successfully countering Snap,” said Sorrell. He called Morgan Stanley’s downgrade of Snap a “seminal moment” in the market’s perception of the company.
Investor fever for Snapchat, which boasts a heavily millennial user base, hit its heights after NBCUniversal disclosed a $500 million investment in Snap a day after its March 2 IPO.
Now the selloff of Snap shares has hit in full force, with the stock closing below the IPO price for the first time on Monday. Some investors have expected the stock to decline further after insiders, including CEO Evan Spiegel and CTO Bobby Murphy, become free to sell their shares once the post-IPO restriction on their stakes expire July 30.