Snap Inc (NYSE:SNAP) may be down, but it’s far from out. The firm’s shares were set to bounce on Friday morning as traders recovered from a tech sell-off. At time of writing shares in the firm were selling for 17.30 on the pre-market. That’s an increase of 1.76 percent from Thursday’s close.
One group of traders will be happy with the stock’s recent fall. Those shorting Snap Inc have made close to $200 million according to a recent report. That makes it one of the best-paying shorts on Wall Street over the last six months.
Selling out of Snap Inc (NYSE:SNAP)
Investors have seen Snap Inc (NYSE:SNAP) shares fall steadily since the firm went public back in March. The price drop appears to be related to risk anxiety on Wall Street rather than anything related to the firm’s own performance. By any traditional metric the mobile heavyweight is overpriced.
It doesn’t make a profit, and it exists in an industry where changes come hard and fast. With a market nervous about political risk and interest rate rises, Snap stock has been a loser.
Snap Inc (NYSE:SNAP) suffered a rocky day on Wall Street on Thursday, June 15th. The firm’s shares fell by close to 5 percent in daily trading. The fall drove the shares before the $17 price tag they had at their initial public offering. Breaching that level has been a warning sign for traders in many other tech concerns.
Snap stock pays dividends to shorts
Because it doesn’t make a profit Snap Inc stock, like many big tech concerns, doesn’t pay dividends. There is one group of people, however, who are making cash from the firm’s shares. Those who decided to sell the stock short since the post-IPO price spike must be proud of their positions.
Ihor Dusaniwsky, who authored the report for S3 partners, says that “With investors dubious of the viability of its business model, slow user growth coupled with competition from established application providers Google, Facebook, Instagram and WhatsApp, Snap shares have been under pressure.”
Competition is a major limiting factor on the value of the mobile application maker. The real culprits for the recent fall in price may be much more tangible however. This week has seen a broad technology stock price drop, which drove Snap stock lower. The ultimate causes are Janet Yellen and Donald Trump.
First Yellen, who announced and interest rate rise on Wednesday, is essentially bringing in an era of higher capital costs. That comes at a time when Snap may need to invest more and more in order to grow. President Donald Trump, who is now under investigation for obstruction of justice, has caused investors to lose confidence in stock price growth, at leased in the short term.
Looking for the Snap Inc stock storm
Some investors, most notably David Stockman, who headed the Office of Management and Budget under President Ronald Reagan, think Trump trouble could destroy the stock market. He says “This is one of the most dangerous market environments we’ve ever been in. It’s the calm before a gigantic, horrendous storm that I don’t think is too far down the road.”
A storm like that can not be good for Snap Inc (NYSE:SNAP). Shorts that have already pulled in massive gains will be considering the long term rewards. If chaos does come to the market, it’s plausible that the stock would be hit harder than others, and shorts could be paid handsomely.