Here’s something I didn’t expect to read today. The U. S. Justice Department and Securities and Exchange Commission has subpoenaed Snap for details on its IPO apparently in connection with a lawsuit from disgruntled shareholders who claim the company played down its rivalry with Instagra…
Here’s something I didn’t expect to read today. The U. S. Justice Department and Securities and Exchange Commission has subpoenaed Snap for details on its IPO apparently in connection with a lawsuit from disgruntled shareholders who claim the company played down its rivalry with Instagram.
Reuters first reported on the subpoenas which Snap has confirmed. Precise details aren’t clear at this point but Snap told Reuters that the probe is likely “ related to the previously disclosed allegations asserted in the class action about our IPO disclosures.”
Snap went public last March with sharing popping over 40 percent on its debut to give it a valuation of $30 billion. It’s market cap today is a more modest $8.9 billion due to numerous factors including, most prominently, the efforts of rival Facebook to compete with Instagram, which has rolled out a series of features that mimic Snap’s core user experience.
That cloning has taken its toll on Snap’s business.
Today, Instagram’s Stories — the feature that closely resembles Snap’s app — has some 400 million users, that’s more than double the users of Snap. But it is far-fetched to claim that Snap played down that threat when it went public, which is what the class action case claims.
The writing had been on the wall for some time as Snap noted in its S-1 filing ahead of the IPO:
But even if an investor something didn’t read that document or reports of it (not advised) there was ample press coverage of the growth of Instagram Stories, and Facebook’s general Snap cloning efforts, since its launch in August 2016 .
In particular, TechCrunch covered the rivalry and cloning closely ahead of Snap’s IPO with reports that showed Instagram was “stealing” Snap users, that it was responsible for slowing user growth and more.
In short, it was fairly clear that Instagram was cloning Snap, which in turn was a key factor for Snap’s growth struggles.
Don’t get me wrong there’s certainly a lot to worry about over at Snap — those poor user numbers, a string of executive exits and a strange u-turn on a recent hire — but this lawsuit looks to be little more than sour grapes from investors who either didn’t fully understand the space they invested in, or simply made a poor decision to back Snap at whatever price they did.
On that note: anyone who invested at Snap’s peak valuation might have lost more money than betting on Bitcoin during this year’s January hype — that’s saying something — but ultimately they have no-one to blame but themselves.
