SNAP – A Sinking Ship

For those of us paying attention to $SNAP, yesterday was an all too familiar day. Imran Khan, SNAP’s chief strategic officer, became the latest member of their executive management team to jump ship. This news comes as the company is working to reverse a poorly received redesign of their flagship Snapchat App, and hot on the heels of the company’s vice president of monetization engineering Stuart Bower moving to Tesla.

The exodus of the companies top talent, added to the dreadful Q1 results we discussed here and the steady user decline leaves Snap in an unenviable position. Snap’s shares have declined more than 40% since their $17 initial public offering price, closing yesterday at a record low of $9.74.

The departure of Mr Khan is a particularly problematic one for Snap. Mr Khan was hired from Credit Suisse Group AG, where he was head of Internet banking. He had helped the bank secure a role in the largest ever IPO — Alibaba Group Ltd. He was brought on by Snap to help CEO Evan Spiegel turn the free app into a profitable business and eventually guide the company through its initial public offering.

Mr Khan helped Snap to develop a program for selling ads, similar to those used by Facebook and Google. He was also the person on the front lines as Snaps chief advocate, explainer and salesperson, especially to advertisers and Wall Street. To many he was the public face of Snap and his departure leaves Snap without a clear connection to Wall Street at the time when it’s stock has just hit a record low.

We have been closely monitoring Snap since the announcement of their IPO and have been steadfast in our belief that it has been hugely overvalued. Out initial coverage from Feb 2017 can be read here. The continuing trends around $SNAP and the steady news feed of executive departures, lowering stock price and user decline only serves to solidify our position.

$SNAP has been short call in our IBR Portfolio since the IPO. We expect to hit our $5.00 target by year-end.

Snap Inc. is a sinking ship, remain short!!

David & The Team

Twitter: @david_kav

Luka Marjanovic

Partner

Luka holds a Bachelor’s in International Business and a Master’s in International Management. During his undergraduate studies he worked as a research assistant in the field of Big Data; founded his own consulting firm providing services to local SME's in various sectors and invested in the capital markets; as well as working pro-bono providing education and career counselling. Prior to his business education, he studied Biology-and-Biotechnology, and served in the Danish Royal Army as Second Sergeant, leading and managing a group under extreme conditions and pressure. Luka has spent significant time abroad, living and working in seven different countries. When he's not in the office, he's chasing the next gusts windsurfing, carving the mountain snowboarding or out in the forest for a jog.

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