Snap Inc. stock slipped below the price of its initial public offering for just the first time amidst doubts about the ability of the company to grow as fast as was initially expected and following recent declines worldwide in technology shares.
The stock was down at the close 1.1% in New York at $16.99, which is less than the original IPO price of $17 per shares set March 1.
To regain its value, Snap will have to prove its advertisements are must buys, not an experiment and will have to keep innovating its product as its most popular features are being copied by Facebook, said analysts.
The pace of the company’s growth in monetization might not have the speed it originally modeled, said an analyst with Citigroup, in a note that downgraded the stock in June.
Many large tech stocks, such as Apple, Nvidia, Microsoft and Facebook declined over the last month after Wall Street began raising some red flags on several high valuations.
Snap, based in Venice, California, in its IPO drew investors enthusiastic about the popularity the company had with young people who send videos and photos that quickly disappear and it became intriguing for advertisers wanting to reach that elusive audience.
However in May, Snap posted earnings as well as growth in daily active users (DAUs), that fell short of estimates by analysts casting much doubt over the company’s ability to live up to a valuation of more than $20 billion.
Close to 35% of the analysts that follow Snap recommend purchasing the stock showed online data. There could be another catalyst as well, to drive shares further downward. On July 30, stock insiders who had shares in lockup following the IPO will be able to start selling them.
On March 2, the first day Snap traded, the stock jumped by 44%. The following day it increased by another 11% bringing the prices to what remains its all-time high of $27.10.
Interest due to that performance drew in other private businesses to hold IPOs, after a number of months of no new tech public offerings.
However, that enthusiasm was short-lived. While the 2017 first half saw U.S. tech IPOs jump from the previous year, there is more concern over the listing of Snap than with its peers. Of the 14 tech stocks that have gone public through June 8 of 2017, shares of Snap were shorted the most as traders bet shares would fall.