Twitter Inc (NYSE: TWTR) has one of the best products that nobody can figure out how to monetize. The firm’s microblogging network is at the heart of pop culture, journalism and, regrettably, politics. Despite that, CEO Jack Dorsey can’t figure out how to get positive cash flow from the social network.
On Friday morning it seems as though Twitter has a rival for its worst tech IPO title. Snap Inc (NYSE: SNAP), the firm behind the zeitgeisty Snapchat mobile application, saw its shares collapse after a disappointing earnings report. For investors who think mobile is the future, but who don’t know which companies to back, these two have been real losers since they went public.
Tracking Twitter stock, Snap Inc collapse
Since Twitter Inc (NYSE: TWTR) went public it has lost around 62 percent of its value. For a firm primed for huge growth, at least according to the more effusive analyses, that’s a pretty major loss. Since going public the firm’s story has featured management turmoil and brain drain. Its user growth has ground to a halt, and every buyout rumor has lead nowhere.
Compare that with Snap Inc (NYSE: SNAP). The firm’s big app, Snapchat, is still one of the most popular out there. It’s adding features all the time, and young people seem to love it. Unfortunately, it’s not those young people that are making investment decisions. On this morning’s market, after its weak earnings report went public, shares in Snap Inc fell by more than 12 percent.
That means that since its IPO in March, the firm’s shares have lost more than 50 percent of their value to date. That’s not quite as bad as Twitter, but Snap Inc has gotten there in record time.
Another problem affecting Snap is the level of control exercised by the firm’s founders. Like Google and Facebook, founders hold an outsized number of the voting rights in the company. Snap’s structure goes even further than that, however. The shares you can buy on the public market, A class shares, don’t have any voting rights at all.
Picking the best of the worst
If you’re risk averse Snap Inc (NYSE: SNAP) stock and Twitter Inc (NYSE: TWTR) shares are to be kept away from. The reigning theory is that these firms are protected on the downside because of high user numbers and tech assets. Traders seem to believe that the worst case scenario is a buyout at a lower than hoped price. Twitter Inc history so far seems to deny that theory.
As Twitter stock slammed into each new low on its way to a price of just over $14 per share, buyout rumors circulated. Now the firm is worth just $11 billion by market cap. Any tech giant, or even a media firm, could afford to subsume it easily. Yet there have been no serious offers.
Perhaps the user base of these firms isn’t worth as much as Wall Street seems to think. After all, firms like Facebook and Alphabet Inc already have control of more users than they seem to know what to do with. Who then, is ready to buy these high priced apps? That’s the answer a whole lot of Twitter investors have been looking for. It’s possible that they’ll soon be joined in that ponderousness by Snap Inc investors.