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Snap's shares continue to crackle and pop

Snap's shares continue to crackle and pop

But it fell 12 percent Monday, then another 12 percent through late afternoon trading on Tuesday, bringing its price to $21 and erasing the initial gains for anyone who bought on the open market.

With Snap shares trading at around $28 per share Monday (up 65% from the IPO price), the Venice, Calif. -based company has a market cap of more than $31 billion, making it worth more than CBS, Viacom, Dish Network and Twitter. However, if the stock price continues to move down during the days ahead, this could be an indication that investors are not confident in the platform's ability to drive growth over the long-term. Twitter, since its 2013 IPO, has experienced stalling revenue growth and the company, after the return of co-founder Jack Dorsey, has been forced to cut costs and shuffle leadership.

That's a problem for Snap, which, like other social media companies, makes its money from advertisers, not consumers. Shares of the company fell by nearly 12 percent on Monday, erasing a portion of gains the company made on the previous two business days. Snapchat's stock rose another 11% on Friday, reaching a high of over $29 per share. As we had highlighted in a previous post, we thought SNAP was an IPO you should let go. Snap's growth slowed sharply in the fourth quarter of 2016. Presumably, Snap will get more favorable coverage from its underwriters, despite the Chinese wall that is supposed to stand between investment banking and research divisions.

Facebook's IPO in May 2012 was considered by many to be a failure because the stock price almost plunged below the offer price of US$38 at the opening of trading. But Silicon Valley companies like Snap Inc have relatively young insiders and investors.

Last week, Snapchat's parent company was the talk of the town.

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The IPO was considered a success, however, raising $3.4 billion for Snap.

Three years on, however, and Twitter is now trading at around US$15. Shares were last up 8% on the day at $26.54. That's a 42% decline from its IPO price and the company has consistently generated losses since.

"This IPO shows a huge vote of confidence in the continued innovation coming out of Silicon Valley", said Mark Yusko, chief executive of Morgan Creek Capital Management, which owned pre-IPO shares of Snap and also participated in the IPO.

Facebook and Google were able to quickly establish supremacy in the Internet advertising markets; Snap is already facing concerns about its ad growth amid fierce competition from rivals in the online media space, not least Google and Facebook themselves.

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