Snapchat is one of the most popular applications in the world today. Tons of people, especially young ones, use it every day to share what's happening with their friends and communicate with them. It quickly became popular, and more and more people started to love the app. With that popularity came massive growth, and with that growth came the expectation that Snapchat would eventually start making money. With that idea in mind, let's take a look at what has happened.
Snapchat's IPO.
The stock IPOed at $17, before the public had access to it. After the stock went public, Snapchat skyrocketed to an approximately $27 valuation by May 3rd.
That's the last time the public has ever seen the stock value for the app go so high. Since then, Snapchat has been on a steep decline that shows no signs of slowing down just yet. When the stock dropped below the IPO price of $17 on July 11th, it was time for investors to hit the panic button. The resulting selloff has left the company in a poor position that doesn't look like it's getting better anytime soon.
Lowest Point Ever.
Today, Snapchat's stock hit a new low point at $12.65. Investors in the stock have lost any gains made since the IPO, and employees in the company who had stock options are seeing the value of those quickly disappear. Thankfully, there is one good sign for Snapchat.
There wasn't a mass selloff at the end of the employee lockup period, which happened on July 31st.
At the end of a lockup period, employees have a chance to sell their shares and cash out, effectively divesting themselves from their stock options. These stock options can sometimes provide hefty rewards for employees who stuck with a company that does well. Unfortunately, Snap's stock has done nothing but diminish in value.
Still, it's encouraging that there hasn't yet been in a massive dip in the price of the stock.
However, Snapchat does report earnings on August 14th, which means employees do need to wait before they can sell. It's possible that they will, but at such a low valuation, it's hard to believe that a ton of Snapchat employees will really choose to part ways with it.
Opportunity?
For short sellers, Snapchat has been the chance of a lifetime. The stock halved its value from May and is still on a steep decline, making anyone who bet against what was originally an insane valuation for Snapchat look like a genius.
Now though, it may be time to look at buying Snapchat shares. Instagram has presented a large challenge for Snapchat, as they steal users, but young people know that Snapchat isn't going anywhere anytime soon. The youngest generation uses it frequently, and a large portion of the youngest generation doesn't use Facebook at all. Snapchat was once an extremely overvalued company, but now that it's at the Lowest Point, it looks like a solid buy target.
