Snap has already tumbled 11% on day four

Vox The Case That Snap Really Is Worth $33 Billion

When a company goes public, the last thing the it wants is for insiders to immediately cash out by dumping millions of shares into the market.

Undoubtedly, neither the company nor the stakeholders will ever prefer it to become like Twitter, which is witnessing declining user base, revenues and earnings.

Less than a week after the company celebrated its first day of trading on the New York Stock Exchange, the stock is down sharply.

Snap stock fell more than 10 percent, its second straight day of double-digit declines. The company has a market value of $37.8 billion.

The SNAP media circus was nothing compared to the excitement surrounding the Facebook Inc (NASDAQ: FB) IPO back in 2012. The messages or "snaps" that users send disappear within minutes or hours and are animated by splashy filters that give users doe eyes, bunny ears and amusing voices.

In addition, the company will have a tough task grabbing market share in the digital ad space, which is mainly dominated by Facebook and Alphabet GOOGL aka Google. In a research note published the day of Snapchat's IPO, equity research analysts James Cordwell stated that Snap's revenue growth was "unsustainable given Snap's unproven monetization potential, structurally lower profitability and likely challenges in materially reaccelerating user growth".

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The Securities and Exchange Commission financial disclosure statement for Snap, which calls itself a "camera company", showed an extraordinarily strong monthly revenue per user growth that tripled from $.31 to $1.05 over the a year ago. At the same time, the company also warned that it might never be profitable.

Snap Inc. labels itself a "camera company". Although Snapchat's user base is growing at a faster rate than Facebook, this growth is ultimately unsustainable given that Facebook is aggressively cloning Snapchat's most popular features. The company already has a valuation that is nearing $70 billion.

"Ultimately, Snap's competition, which includes wide-moat Facebook with almost 2 billion users, is overwhelming, in our view".

Both of these companies are solid companies with strong growth numbers. However, as of now, I think investors should watch the stock from the sidelines and wait for a significant irrational move, in either direction, before taking a long or short position.

Provided that Spiegel and cofounder Bobby Murphy don't sell additional shares, Spiegel's 3% stock award will also mean that he has complete voting power over Snap after three years. After the IPO set the stock price at around $17, it shot up over $28.

The months-long euphoria leading up to Snapchat's big debut on the New York Stock Exchange is fading quickly, as an nearly befuddled confusion sets in among investors as to what the real long-term value of the company is.

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