Short Interest in Snap Surges by 25 Million Shares

By Douglas A. McIntyre Updated Jan 12, 8:15AM EST · Published Sep 13, 6:30AM EDT

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Short Interest in Snap Surges by 25 Million Shares — © Thinkstock

Much of Wall Street remains skeptical, or even pessimistic, about the fortunes of social media company Snap Inc. (NYSE: SNAP). Short interest in its shares rose by 25 million to 94 million in total for the period that ended August 31. The figure is an extremely high 19% of Snap’s float. No other stock traded on the New York Stock Exchange posted a larger increase in its raw number.

Investors have a long list of reasons to bet against the company. Its shares trade at $15, against a post-IPO range of $29.44 to $11.28. Snap has had troubling convincing shareholders and potential shareholders that it is anything more than a new version of Twitter Inc. (NYSE: TWTR), a Web 2.0 company that should never have gone public but did for the benefit of venture capital investors, the founders and senior executives.

Snap has made a miniature comeback in the past month, with its shares up by 20% over the period. Short sellers must believe the rally will be short lived. And one investment bank recently warned it was a sucker rally. Deutsche Bank analyst Lloyd Walmsley downgraded the stock from Buy to Hold, which really means “sell” in Wall Street language. He wrote:

After broad conversations across the ad ecosystem over the last month, feedback was decidedly mixed. Facebook’s efforts to copy Snap’s product (on a best-in-class ad platform) has also somewhat obviated the imperative some had around Snap a year ago; many feel they can get the key younger audience via Instagram.

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It is a complex way of saying the social media world is too crowded, people will not use several social media platforms at once and Facebook Inc. (NASDAQ: FB) continues to and will always dominate the market.

Nothing new or particularly positive has happened at Snap recently. Many investors believe it is still a dog, and the weight of evidence is in their favor.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.