Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 09 March 2017 at 15:00 GMT

A bumpy week for Snap

  • Shares of Snap have traded in a volatile manner since the firm's IPO
  • Options are available as of March 10
  • 'Short selling of Snap has decreased': Reuters 
  • Investors contribute capital but do not hold any influence in Snap
Snap website
This is how Snap messages can look like. Photo:
By Clemens Bomsdorf

Social media firm Snap's first week of trading is essentially over (the initial trade took place on March 2 in New York) and it has been a bumpy road. Small and large investors alike, however, are definitely still looking at the share. We therefore want to shed some light on a few under-discussed aspects of the stock, namely voting rights, options, and short selling.

We have already described the business model of the visual social messaging service, which is known for allowing users to send disappearing photos and videos. Saxo Bank head of equities strategy Peter Garnry has also asked whether Snap is worth its valuation and warned of excessive optimism as Snap has never been profitable.

Snap 30 minute charts since its debut last Wednesday, March 2 (click to enlarge)
Snap chart
Source: Saxo Bank
Lets have a look at some more stock-related issues, which investors may not be aware of. 

Firstly, Snap has only offered stock without voting rights. Hence, while investors supply capital, they will not hold the influence that usually comes with buying a share in a listed company. 

Justin Fox, a BloombergView columnist, says one should not be outraged, although Snap is taking it to the extreme. In the Guardian, on the other hand, Nils Partly is more critical, writing that: "technology and social media pioneers already had a shocking record of ignoring the principle that equal economic risk should imply equal voting power. It was poor practice when Google and Facebook floated with shares carrying restricted voting rights, but at least the new co-owners were not entirely frozen out of debates about how the company should be run.“ In his opinion Snap is „a 21st-century firm with a 19th-century structure."

Those interested in neither voting rights nor owning the stock itself can also trade Snap options starting March 10. The issuing reflects the high interest in the shares of this social media giant. When it comes to its business model and listing, Snap is often compared to Facebook and Twitter. 

Have a look at our earlier article on the issue and see the chart below for a comparison of recent performance of Snap (always yellow line) versus Facebook (pink) and Twitter (blue).

Snap (yellow) vs Facebook (pink) and Twitter (blue; click to enlarge)
Snap Twitter Facebook
Source: Saxo Bank 

According to a Reuters report, there has been quite a bit of short selling going on in Snap shares, meaning investors are speculating that the stock price may fall even further. However, referring to data from S3 Partners, Reuters writes that short selling on Wednesday was much less than earlier. 

These are all factors that might influence the future of Snap's share price. Only time will tell whether it will follow the path of Facebook (now reaching new highs) or Twitter (known for its poor performance).

— Edited by Michael McKenna

Clemens Bomsdorf is a consulting editor at Saxo Bank


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