SNAP Stock Tumbles as Layoff Rumors Swirl

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  • Snap (SNAP) fell overnight on rumors it will lay off 20% of its workforce.
  • The company is also losing key executives to Netflix (NFLX).
  • Snap can’t be sold without the co-founders’ approval.
SNAP stock - SNAP Stock Tumbles as Layoff Rumors Swirl

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Snap (NYSE:SNAP) was down 7% overnight after a report the company might lay off 20% of its workforce. SNAP stock is now up in premarket trading, but since the start of 2022, it’s down more than 78% with a market capitalization of $16.5 billion.

The divisions working on mini-games and a social mapping app called Zenly will see the deepest cuts, according to The Verge. The company is also losing two top executives to Netflix (NASDAQ:NFLX) as that company works to build an ad-supported version of its streaming service.

What Snapped

Snap was founded in 2011 as an alternative to Meta Platforms (NASDAQ:META), then known as Facebook. It’s best known for its app Snapchat, which automatically erases messages. It evolved into photo and video sharing. It also sells two consumer products, smart glasses called Spectacles and a drone called Pixy.

While the company is growing, it’s also losing money — something 2022’s market does not like. Its most-recent quarter showed a loss of $422 million, or 26 cents per share, on revenue of $1.1 billion.

Snap’s initial success made co-founders Evan Spiegel and Bobby Murphy into billionaires at age 25. Their wealth fell from $11 billion each in 2021 to about $2.3 billion today. While they own one-quarter of the common shares, they control the company through voting stock.

Analysts at TipRanks have lost faith in SNAP, with 23 of 35 now having it in the “hold” category. Marketbeat estimates only 5.17% of the shares are being held short.

What Happens Now for SNAP Stock?

The close control of the voting shares will keep hedge funds or larger tech companies from changing the company’s course. It can’t be sold without the founders’ approval. Buying it on the dip requires that you believe Spiegel can turn things around.

Hope lies in the current regulatory scrutiny of its rival, ByteDance’s TikTok, writes InvestorPlace’s Luke Lango.

On the date of publication, Dana Blankenhorn held no positions (directly or indirectly) in any companies mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.


Article printed from InvestorPlace Media, https://investorplace.com/2022/08/snap-stock-tumbles-as-layoff-rumors-swirl/.

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