Snap Inc. shares fell below their initial public offering price amid questions about the company's ability to grow as fast as initially expected and after wider declines recently in technology stocks worldwide.
The stock fell 1.3 per cent to US$16.95 at 3:59 p.m. in New York, below the US$17 IPO price set March 1. To regain value, the company will need to prove that its advertisements are a must-buy, not just an experiment, and will need to keep innovating on its product as Facebook copies its most popular features, analysts have said.
"The pace of growth in monetization may not be as fast as we originally modeled," Mark May, an analyst at Citigroup Inc., said in a note downgrading the stock last month. "We expect user growth will remain modest near-term."
Many large technology stocks, including Facebook, Apple Inc., Nvidia Corp. and Microsoft Corp., declined in the past month after analysts began raising red flags on some of the high valuations.
In its IPO, Venice, California-based Snap drew investors who were enthusiastic about a company popular with young people for sending fun photo and video messages that disappear, and it was intriguing to advertisers who want to reach that elusive audience. But in May, Snap reported earnings and growth in daily active users, or DAUs, that missed analyst estimates, casting doubt over its ability to live up to its more than US$20 billion valuation.
