Amid the lockup expiration of Snap shares on Monday, TheStreet's founder and Action Alerts PLUS portfolio manager Jim Cramer said the newly public company has been like Blue Apron (APRN) - Get Blue Apron Holdings, Inc. Class A Report - very disappointing.
Shares of Snap Inc. slid 1.1% to $13.67 on Monday as the company's first lockup period expired over the weekend and as many as 400 million shares were eligible to be traded for the first time. The stock slid as much as 5%, close to an all-time low, earlier on Monday.
With the expiration of the 150-day lockup period, early investors and insiders who bought into the stock can start selling their shares. This group includes CEO Evan Spiegel, CTO Bobby Murphy and venture capital firms like Lightspeed Ventures and Benchmark Capital. Snap's current float is 188 million shares, so the additional 400 million potential shares could upset near-term supply/demand dynamics. Historically, companies have seen sizable stock moves when their lockup periods expired.
The lockup expiration comes as Snap has weathered several rough months since its IPO in March. The stock has dropped nearly 23% over the month of July, during which it fell below its $17 IPO price for the first time and was downgraded by two of its lead IPO underwriters. Snap shares have fallen roughly 44% so far this year, as investors have grown more and more concerned about its ability to show sustained growth in the face of fierce competition from Facebook Inc.'s (FB) - Get Meta Platforms Inc. Class A Report Instagram.
On top of that, Snap's 180-day lockup period is set to expire at the end of August, when directors, executive officers and other employees will be able to sell their shares. Up to 782 million shares could become available at that point, putting added pressure on the stock.
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Also on the horizon is Snap's second-quarter earnings report, which is due out on Aug. 10. JPMorgan analyst Doug Anmuth believes Spiegel should use his company's second-quarter earnings call to note that Snap founders and other executives won't be selling their shares in the lockup period. That move would be "viewed positively" and could reduce some anxiety related to the lockup expiration, Anmuth said.
Many investors are shorting the stock leading up to the lockup expiration. Snap short interest -- or wagers against a company's stock price -- was about $1 billion as of July 24, according to financial analytics firm S3 Partners. Short interest in Snap has been building over the last couple months.
Ross Gerber, CEO of investment firm Gerber Kawasaki, owns puts on Snap's stock, and said the lock expiration "will be great for bears" like him.
"This is a negative cycle that you cant reverse from a yacht very far from Venice, CA," Gerber noted. "We think Snap has stopped growing and has no way to make money. We still value it around $10-$12."
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