SNAP just reported earnings and plunged after hours after missing everything. It burned through $288 million in cash. The more it spends, the more it loses. An operational Ponzi scheme of sorts.
The SNAP IPO was led by Morgan Stanley, Goldman Sachs, JP Morgan, Deutsche Bank, Barclays, Credit Suisse and Allen & Company. All the usual criminal cartel banks aside from Allen & Company. Allen & Company is a financial “advisor” – i.e. sleazy stock broker – driven firm based in Florida. I don’t know how Allen & Co. was put on as an underwriting manager other than it’s likely that one of SNAP’s co-founders is buddies with one of the owners at Allen & Co.
Speaking of SNAP’s two co-founders, each sold $272 million worth of stock into the IPO. It would be impossible to know if they sold knowing that anyone who bought the IPO, or has bought share since the IPO, is going to end up holding an empty bag. But I provided an in-depth analysis of SNAP to subscribers of the Short Seller’s Journal in which I concluded that SNAP would eventually go below $2.
I have to believe that the Einsteins at Morgan Stanley, Goldman et al had to know this. That being the case, I don’t know how the public issuance of SNAP shares is not fraud. The venture capital and private equity funds who invested in the early rounds were given an out by the public – a public that was lied to about SNAP’s future prospects.
As I finish this, SNAP is now below $12/share ($11.85). It’s still a great short here. If I have time to pour through the numbers, I’ll be updating the subscribers of the Short Seller’s Journal and lay out a course of action to short the stock from here. You can learn more about this newsletter here: Short Seller’s Journal information. There’s no minimum subscription period and subscribers get a 50% discount on the Mining Stock Journal.
SNAP just reported horrible numbers vs. Wall Street forecasts. Net income was actually a Net loss of $2.31 vs. a loss of 19 cents forecast. Revenues were light by $8 million, coming in at $149.6mm vs. $157.9 million expected. Active subscribers were also lower than expected. The Ponzi stock is down 18% as I post this:
IRD reviewed SNAP when it IPO’d and warned investors to avoid or short this stock: Avoid SNAP. Short Seller Journal subscribers were presented with an even more detailed analysis.
Investment Research Dynamics’ Short Seller’s Journal has presented several ideas recently which offered subscribers significant gains from shorting or buying puts on the ideas. KATE and IBM are two examples. Find out more clicking the link above or the banner below
The only aspect of the SNAP IPO that was more horrifying than the media attention given to monitoring SNAP’s first trade of the day is the valuation assigned to it by investors. Janet Yellen undoubtedly was not thinking about SNAP when she happened to mention in her Congressional testimony last week that “valuation metrics do appear…stretched.” That assertion is unarguably one of the most shameless understatements in history.
SNAP is being marketed by its financial promoters as “a camera company.” In reality it’s little more than a glorified social media business model. The product empowers the user to send photos and videos to friends rather than using a text message. Big deal. In 2016, SNAP generated $404 million in revenues and but lost $514 million. That’s the manipulated GAAP number for net income. The Company’s operation burned $611 million. Note: these are the numbers prepared by the Company that were used to generate the highest possible price for the IPO, which means the numbers are likely not accurate.
SNAP is just one thing that business owners can use to help them when it comes to their social media. There are plenty of other things that they should be doing to make sure that their business stays at the top. If you are a business owner then you need to make sure that you find what works best for your business. This might mean that you only focus on one social media platform such as Instagram. If this is the case, then you need to make sure that you learn as much as you can, such as how to get more followers on instagram, as this way you can improve your chances of getting your business to the top. If you decide to use different social media platforms, then make sure that you know what you are doing. You might decide that SNAP is the only thing that you need to worry about though…
At IPO SNAP was valued at 54 times revenues. That’s the kind of multiple that a venture capital company would pay for a newly emerging company with a unique product that is still embedded with largely unquantifiable risks of the investment going to zero. SNAP is a newly emerging company which offers just another “flavor” of social medial. Mind you, this is a social media tool that is primarily used by millennials and “Gen Z’ers” who quickly tire of the latest cellphone app fad du jour. In fact, new user fatigue is already showing up in the number. Over the last 4 quarters, the quarterly growth in growth “active daily users” has slowed considerably – just 4% from Q3 to Q4 – and its flat-lined in the rest of the world outside of the U.S. and Europe.
As a social media company, SNAP’s user growth-rate curve is already significantly below that of Facebook and Twitter in their early stages as public companies. In truth, if SNAP wants to insist on being a “camera company,” then its stock likely will follow the same path as that of GoPro. GoPro IPO’d in June 2014 at $24. The first trade was at $30. The stock ran up to $98. It currently trades at $9.40.
The overarching issue here is whether or not the grotesquely overvalued SNAP IPO will mark the top of this seemingly indefatigable rise in stocks. Since closing above the 20k holy grail level on February 3rd, the Dow has risen another 1,100 index points in just 17 trading days, while the meatheads on financial bubblevision have been mindlessly cheering on the action with drool sliding down the sides of their mouths. 27.5% percent of this move occurred after Trump’s congressional address Tuesday night. Conspicuously absent from the speech was any new policy ideas which might have been responsible for causing the ludicrous spike up in stocks.
David Stockman has called this action in the stock market “the greatest sucker’s rally of all time.” In today’s episode of the Shadow of Truth, we discuss the insanity that has drawn mom and pop retail investors into the “warm water” with its Siren’s call.