WASHINGTON, June 15, 2017 – Aside from reverberations and negative vibes stemming from Wednesday’s incomprehensible Fed interest rate increase, plus the continuing tech nosedive and disconcerting political reports emanating from The Swamp (Washington, D.C.), some of the grimmest news on Wall Street Thursday was the smackdown in shares of Snap, Inc. (symbol: SNAP), better known to the public as the parent company of Snapchat.
SNAP shares went public in a much-ballyhooed March 3 IPO, quickly gaining a quick pop for the professional investors who got the shares they wanted. Neophyte millennial investors – largely fans of this ephemeral disappearing photo app – climbed in right at the top out of love for the product, and likely haven’t seen their shares hit their purchase price again.
Notes a CNBC report from earlier today,
“Snap closed at its IPO price on Thursday, with shares hitting $17 for the first time since the company debuted on the New York Stock Exchange.
“Shares sank 4.9 percent in intraday trade, and are down 42 percent from their high of $29.44 on March 3, the second day of trading.
“The instant messaging and photo application began trading in early March. Its IPO price was $17 a share, and shares surged 44 percent during their first day of trade.”
We had purchased a minimal amount of SNAP IPO shares as a bit of a lark to see if we could make some money after our brokerage house’s minimal 31-day hold rule. And we did. Barely. At which point we exited as quickly as possible.
In reality, we despised this offering for at least three key reasons:
- Despite the company’s hype for its new camera device, we’ve already been there, done that. That device is a lame idea whose time has come and gone, as every tech company and its siblings already has a competing device on the market along with the market share that goes with it. Added to Snap, Inc.’s easily duplicable, disappearing photo-hack product and its faddish nature, there’s not a lot of value- added here, a point that’s being proved every day by Facebook (FB), which is already eating SNAP’s lunch in this category.
- In an act of supreme arrogance, in our view, the company CEO and Snap, Inc.’s majority share holders offered only nonvoting shares to the public. This isn’t the first time this has happened, nor is it likely to be the last. But in our view, offering non-voting shares to the public and expecting them to lap those shares up is typical corporate selfishness and hubris, meaning that if the majority holders screw the company up (which they often do), the shareholders are left holding the bag with no say as to how to fix the mess.
- Finally, something we didn’t really mention in our earlier articles on SNAP: The March IPO offered a minimal amount of shares to the public. Which means that tons more shares are likely on the way.
The CNBC report cited earlier underlies these concerns after listing even more bad news from stock analysts:
“Several analysts’ sell ratings have cast doubt over the longevity of the company. Only about one third of Wall Street analysts have buy or overweight ratings, with 50 percent of analysts at hold or neutral and another 17 percent with sell or underweight ratings, according to FactSet. Such a mixed view so soon after a large technology IPO is a rarity.
“The stock will face more price pressure when 1.2 billion shares become available for sale at the end of July.”
We’ve said it before and we’ll say it again. Corporate hubris – the ancient Greek word for overweening pride and arrogance – will kill a company and its shareholders every time. Sure, SNAP could stage a dramatic turnaround or get bailed out by some tech buyer possessing zero common sense. But we’re not sure this one has much of a chance in the months and years ahead.
Advice to millennials: get out while you have the chance, and do your homework before you start investing for life.
SNAP’s continuing decline was likely not helped today by the continuing tech bloodbath that’s tackled many big tech names since these stocks peaked just a few trading days ago. Apple (AAPL), Amazon (AMZN), Google (GOOG and GOOGL), Facebook (FB) and a few others were part of today’s general tech smackdown as well. These companies, however, have a track record, make real products and, in the main, do offer voting rights with their shares. In addition, Apple actually pays a decent dividend. That’s where to go when the current tech sale hits its third and final markdown. The problem is in guessing when that is.
On the political side of the equation, we seriously question the Federal Reserve’s 0.25 percent interest rate hike, announced yesterday, in addition to its modestly aggressive schedule for running off its vastly over-large balance sheet.
It’s true that there’s good theoretical justification for moving ahead on both these fronts. But inflation, which the Fed has long claimed it wants to stabilize at around 2 percent per annum, is sinking, not rising.
So we fail to see where this kind of foolish consistency is going to help out the economy at this point, particularly since the D.C. Swamp’s drain is currently clogged by Congressional inaction – due to Republican fecklessness as much as it is due to the Stalinist Democrat-Resistance approach to an election that even Republicans thought the Democrats would win.
Too bad, Democrats. Despite your usual ballot box stuffing antics, you lost anyway, so get over it.
Problem is, they can’t. Worse, both elected Democrats and the DNC alike continue to egg on the Soros-paid brown shirts that support them, looking now for any way to oust the duly elected Republican president they hate.
This constant, active agitation and hating is, at least peripherally, a tactic whose inevitable results surfaced Wednesday morning on an Alexandria, Virginia baseball diamond.
We wish badly wounded House Majority Whip Steve Scalise (R-LA) well during what we hope will be a speedy, albeit difficult recovery. Ditto as well to those who were shot, injured or otherwise traumatized by the miserable #NeverTrump “lone wolf” who perpetrated this monstrous act against democracy.
But we’ve been warning that blood would be shed before this long anti-Trump crusade was over, and we’re worried that Wednesday’s tragedy literally marked just the first shot.
The market itself is quietly but palpably beginning to worry that we may already be in the early innings of a very different kind of Civil War from the original one – which, this writer believes, we actually are.
If those political dead-enders who are at least tacitly encouraging this kind of violence don’t lay off, and soon, investing in the U.S. stock market could become a very risky business indeed, as could life in America itself.