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SNAP! - And It's Gone! Poof! (A South Park PSA Clip For Millenial SNAP Investors)

|Includes: FB, Snap Inc. (SNAP)

Robinhood's (a US broker quite popular with younger generations) numbers are proof enough that SNAP really is loved by first-time (or at least very young and to some extent inexperienced) investors:

Trading volume on Robinhood, a US online broking app popular with millennials, surged 50% March 2, the stock's first day of trading, the Wall Street Journal reported (paywall), adding that the median age of Snap buyers was 26, the same age as the CEO and founder of Snap, Evan Spiegel. (The median age of a Robinhood user is 29.)

In a survey of 6,000 Robinhood users released before the IPO, 35% said they planned on buying shares and another 35% said they were considering it, according to USA Today.


I therefore see many painful Stanley experiences coming up with SNAP after the IPO euphoria is over:

The "And it's gone..." even perfectly matches a $SNAP core feature. Disappearing content (or in this case, investor funds). Oh, the irony.

Two main reasons:

1. Social media gorilla FB (no position, therefore I don't care what FB does, just stating facts) can and will copy most of the interesting features of SNAP - what FB has been doing for months already using both WhatsApp and Instagram:

Snapchat growth slowed 82% after Instagram Stories launched


FB's Instagram copying most of Snap's interesting features will curb Snap's growth potential. That's good enough for FB to keep SNAP at bay:

Is Mark Zuckerberg Secretly Strangling Snapchat?


Future user growth (since average interaction and usage time for the current user base is already very high) is basically all that supports Snap's lofty valuation - look what happened to Twitter (NYSE:TWTR) once growth dreams vanished. Poof, bubble metrics gone, TWTR is down over 60% since the first print in late 2013.

2. We have seen nothing yet in terms of post-IPO stock dumping because of lock-up periods for insiders. Just wait until these shares are traded:

Lock-up periods can buoy companies at risk of a stock selloff in the months following their IPO. This risk is particularly strong for companies in the technology sector. Eight of the 10 biggest technology IPOs fell by between 25 percent and 71 percent in their first 12 months on the public market, according to a Reuters analysis of market performance.(Source)

The hard numbers for other insiders are coming up sooner:

The first key lock-up date for Snap will occur roughly 150 days following the IPO. At that point, pre-IPO investors, such as company insiders, will be allowed to sell their shares. The second major lock-up date applies to 25% of the shares that were offered in the IPO itself. Of the 200 million total IPO shares, 50 million of the shares will be restricted for one year. (Source)

(There are many more, I just don't have time to list them all here).

Who knew South Park clips provided good investment advice and warnings?

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a short position in SNAP over the next 72 hours.

Additional disclosure: I already closed a first short position in SNAP after its drop below $20.