Business / #ForbesBusiness

May 3, 2018,   8:50 AM

Snap Cofounders' Fortunes Plunge A Combined $1.3 Billion In One Day

Angel Au-Yeung


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Snap SNAP -21.94% cofounders Evan Spiegel and Bobby Murphy lost one-fifth of their net worth on Wednesday — a combined $1.3 billion — the day after a weak earnings report sent the stock diving 20% during after-hours trading on Tuesday. The stock fell a bit more during trading on Wednesday.

On Tuesday, Spiegel and Murphy were each worth $3.2 billion. By the end of Wednesday, their fortunes had dropped 20.5% to $2.5 billion. The cofounders’ net worths are primarily tied up in Snap stock; they each own about 18% of the company.

Snap announced yesterday after the market closed that it had missed Wall Street’s expectations on revenue and user growth, despite a January redesign of the app. The app overhaul worked to separate personal content from media and advertising in a more distinct way. Users and advertisers, however, balked at the new app, describing it as confusing and unintuitive. Snap reported earnings of $230.7 million, missing analysts' expectations of $243 million. It added 4 million daily users while analysts expected 7 million new users.

Spiegel, Snap’s CEO, tried to assuage investors’ concerns during the earnings call. “While our decision to migrate our Snap Ads business to our programmatic auction led to a short-term slowdown in our revenue growth last year, we made the transition quickly and the company is far better for it,” he said.

Samuel Kemp, an analyst at Piper Jaffray, cited deeper concerns in a note sent to investors. “Mgmt provided a litany of reasons for poor execution (shifts to the ad auction, app redesigns and re-redesigns, negative news cycles, product reliability, etc.), but we believe these reflected a simpler challenge: Snap is a poorly structured company that is demonstrating a clear pattern of mismanagement,” Kemp wrote.

Snap also faces stiff competition from Instagram, which launched its own version of a 24-hour sharing feature called Instagram Stories in August 2016 that is nearly identical to Snap’s product.

“Snap’s sudden rush to profitability could impair its ability to properly invest in improving its struggling product,” Kemp wrote.

Snap listed on the New York Stock Exchange on March 2017. Spiegel and Murphy ended the IPO day with fortunes of $5.4 billion each, becoming the only self-made billionaires in the world under the age of 30 whose fortunes came nearly entirely from shares in a public company.

It’s been a downward slide since Snap’s public listing. In August 2017, Spiegel and Murphy shaved off a combined $1 billion from their net worths after a disappointing earnings call where the company, once more, missed revenue, earnings and user growth expectations.

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