Shares in the company that built photo app Snapchat began to fall on Monday, having climbed for two days in the wake of its IPO.
Snap, the parent company best known for the Snapchat app loved by teenagers across the globe, saw shares plummet in afternoon trading on Monday. The company had opened up 4 percent on its third day of trading, before dropping as low as 9 percent down.
Analysts had warned of “hot air” fuelling the price rise in the wake of its much-awaited debut on the New York Stock Exchange, and reiterated again on Monday that the shares were overvalued. Investors seem to stop and take note around midday on Monday, with its share price falling to 25.12.
Snap floated on the NYSE last Thursday at a valuation of $29 billion, despite never having made a profit. Pivotal Research issued Snap with a “sell” rating last week, valuing the company at $10 per share based on financial estimates for 2017.
“Investors in Snap will be exposed to an upstart facing aggressive competition from much larger companies, with a core user base that is not growing by much and which is only relatively elusive,” analyst Brian Wieser wrote in a note.
Shares were boosted after its IPO by the news that NBCUniversal had taken a $500 million stake in the disappearing-message and media company shortly after its IPO. However, its sudden drop after initial enthusiasm follows the pattern of other tech companies whose flotation was surrounded by large hype, including Fitbit and Twitter.
Global Equities Research analyst Trip Chowdhry noted this in a note to clients:
“Let all the hot air go out, let the private investors cash out, let’s see how the Industry evolves in 1.5 years,” Chowdhry said.