Snap at a Record Low; Short Sellers Close Out Bets
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Snap at a Record Low; Short Sellers Close Out Bets

Snap at a Record Low; Short Sellers Close Out Bets

Snapchat experienced a record low this past Wednesday while short sellers “closed out their bets following paper profits of half a billion dollars since the Snapchat owner’s market debut in March.”

Snapchat’s stocks have fallen dramatically within the past week. Initially, the value of their stocks fell around 5% on Monday, and with Wednesday’s loss, the total decrease in stock value amounts to 9%. It is currently sitting at $12.62 which is the lowest it has ever been since its launch in March.

High costs to borrow Snapchat shares are causing short sellers to avoid betting on potential price declines until more shares become available, and for the first time since their initial public offering, short sellers were able to sell shares. Snapchat also had a disappointing first quarter earnings report back in May, which some say is unfair to claim since it was also being compared to other social media companies like Facebook and Twitter.

To put it into perspective, Facebook recorded 59 million users globally that month while Snapchat only recorded 8 million users. It’s important to note that Facebook has been around for much longer and its platform is much more diverse, which allows for a greater amount of users. Since its IPO lockup expired, it has caused some experts to be wary of its future.

Michael Graham of Canaccord Genuity made the following comment on the issue:

“Often you can see these lockup expirations be more of a bottoming event for stocks rather than a negative event. There’s a lot of negative sentiment going into an event like this and in this case it will stretch out for several weeks. It does take some time, usually, for the shares to get into the market. I think the more important thing for Snap is to show some execution when they report next Thursday.”

Although some experts are concerned about the drop in stock value, Snapchat’s unique interface will still place itself as one of the most popular social media outlets for many people.

Mohammad Ali Sultani
Mohammad Ali Sultani
Mohammad Sultani is currently an undergraduate at the University of San Diego pursuing a degree in Political Science and English. As an experienced writer for various technology, law, and political news outlets, he has shown great potential in his writings and hopes to continue developing his skills. With the goal of becoming an established lawyer and writer, Mohammad is determined to help those in need on both ends of the spectrum.

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