After another quarter of dismal performance, it is time for Snap Inc. (NYSE: SNAP) to give its investors their money back. It could be done. Snap has a market cap of about $12 billion, and it has cash and marketable securities of almost $5 billion. It would need to handle $3.2 billion in convertible securities notes. The assets of Snap, which include 363 million daily active users, drive annual revenue of $4.5 billion, which is growing slowly, and an annual EBITDA run rate of $400 million. These assets would be extremely valuable to other social media companies. Folded into another company, its expenses would fall. Maybe Elon Musk would want to make it part of Twitter.
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Snap’s revenue rose only 6% to $1.13 billion. That is the slowest growth rate since it became a public company. As part of the announcement, CEO Evan Spiegel said:
This quarter we took action to further focus our business on our three strategic priorities: growing our community and deepening their engagement with our products, reaccelerating and diversifying our revenue growth, and investing in augmented reality.
Spiegel is Snap’s founder, and he controls the company’s voting stock. He should have the decency to use that vote to sell Snap’s assets and return money to shareholders.
Spiegel’s ongoing failure showed up in the market’s reaction to the new quarterly numbers. The stock fell 26% to $8 a share. That wiped out $6 billion in market value. The S&P 500 has been up 7% in the past two years, but Snap shares have dropped over 85% in that time.
Snap said advertising revenue troubles, brought on by a weak economy, have caused the problem. It is broader than that. Snap cannot afford to compete with Facebook, Twitter, Instagram, WhatsApp, TikTok and a number of smaller social media networks. The market is simply too crowded.
Snap is worth more to shareholders dead than alive. It is time for management to see that shareholders have cash and not Snap shares.
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