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Snap Shares Dip Below IPO Price for the First Time
By Paresh Dave
Posted: July 11, 2017 9:41am PDT

Shares of Los Angeles technology company Snap Inc. on Monday dipped below the original price at which they were sold when the company went public in March.

Snap shares traded as low as $16.95 before closing at $16.99, down about 1.1%.

Falling below an IPO price for the first time is a common occurrence. It happened to Facebook. It happened to Twitter, Tesla and Fitbit. And by various accounts, half of publicly traded companies sit below their initial price for extended periods.

But it remains a worrisome signal to investors, one that points to waning confidence in the Snapchat app-maker's ability to deliver on promises of increased usage and ad sales in the coming years.

Snapchat reports 166 million daily users of its service, which includes short photo and video messages that automatically delete after viewing. But investors fear that competition from the Facebook-owned Instagram is cutting into Snapchat's popularity.

In Snap's defense, the drop in share price comes as investors rethink their bets on tech companies across the board. Though few financial experts appear to doubt the potential of Facebook, Alphabet, Microsoft and other huge tech businesses, fund managers have raised concerns about whether the prices they've paid to get a stake in the firms is too high.

Enough investors have been skeptical to drive down prices in recent days. The technology sector within the Standard & Poor's 500 index has dropped about 3% since the start of June, after returning more than 20% during the first five months of 2017.

Shares of Snap, a 6-year-old tech company that doesn't generate profit, now trade for 32 times its sales, compared with an average of about four times sales among the S&P 500's tech constituents, according to FactSet data.

Also holding back Snap's share price is an expected increase in supply of stock beginning late this month as restrictions loosen on sales of shares held by employees and others prior to the IPO.

Snap is being sued by shareholders who allege that the company provided misleading Snapchat usage statistics in the run-up to the IPO. The company denies the claims.

© 2017 Los Angeles Times. Syndicated here under contract with YellowBrix, Inc. All rights reserved.

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