Why Snap Should Close and Sell Its Assets

By Douglas A. McIntyre Published Oct 21, 8:30AM EDT

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Why Snap Should Close and Sell Its Assets — © Carl Court / Getty Images

After another quarter of dismal performance, it is time for Snap Inc. (NYSE: SNAP | SNAP Price Prediction) 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.

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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.
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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.
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Snap is worth more to shareholders dead than alive. It is time for management to see that shareholders have cash and not Snap shares.

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.