Snap has fallen below Thursday’s opening price, losing 12 per cent on Monday as analysts issued ‘sell’ ratings on the owner of messaging app Snapchat.
Shares in Snap, which went public three days ago, closed at $23.77, below its $24 opening price on the New York Stock Exchange. The broader market closed down 0.3 per cent. However, Snap is still 40 per cent above the $17 at which shares were sold in its initial public offering.
Snap has so far received no ‘buy’ ratings from any of the seven analysts who have issued reports on the company. Five have rated the stock ‘sell’, or equivalents such as ‘reduce’ or ‘underweight’, and two have rated it ‘hold’ or ‘neutral’. The average price target is $16.80, according to data from Bloomberg.
Analysts working for the IPO’s underwriters, led by Goldman Sachs and Morgan Stanley, do not usually issue their reports for a month after trading begins.
Brian Wieser, an analyst at Pivotal Research, was the first to issue a negative rating on the stock, just as it opened on Thursday. Mr Wieser gave Snap a $10 price target.
Describing Snap as a “promising early stage company”, Mr Wieser said despite its opportunities as an innovative, large, “young-skewing” platform, it was priced too high, considering the “significant risks”.
“Investors in Snap will be exposed to an upstart facing aggressive competition from much larger companies, with a core user base that is not growing by much and which is only relatively elusive,” he wrote. He added that Snap does not offer investors votes on its future, has high expenses and shareholders risk being diluted by substantial share issuances to employees.
Snap had originally hoped for a valuation of $20bn to $25bn, according to people familiar with the deal. After an indicated range of between $14 and $16, which would have priced it lower than the hoped for valuation, Snap set the final price at $17, giving it a $19.7bn market capitalisation, excluding shares issued to employees and bonus stock for Evan Spiegel, Snap’s chief executive, for taking the company public. The stock closed 44 per cent higher by the end of its first day of trading.
The LA-based tech company tried to ensure investors were in the company for the long haul. A quarter of the shares in the offering went to investors including NBCUniversal which agreed not to sell their stock for at least a year.
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