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Donnerstag, 13. September 2018

SNAP: Shorting on Upgrade, Buyout Hopes

I decided to short some SNAP shares at $9.30 per share.

Basic reasons I am negative on SNAP

User numbers are down, quarterly losses are still high. This company still isn't anywhere near being profitable (losses still even exceed revenue) and it looks like Snapchat has already had its peak in popularity among the fast moving community of social media users (remember Myspace? ICQ?). I don't see any significant advantage that could make SNAP compete successfully against Facebook/Instagram (which in turn have the giant advantages of billions in cash and positive cash flow and a vastly larger user base) in the long run.

Contrarian Element

I still did not short it until today (September 13, 2018), because I thought it's TOO obvious.
Analyst remarks (and following news articles today) about a possible bottom and a possible buyout (which i think isn't likely at 10 billions with a shrinking user base) convinced me there is still enough optimism in the market to make SNAP have enough room to fall further.
Usually, buyout hope (unless based on a concrete offer) alone is a very bad investment thesis. When a company's stock looks unattractive, more often than not the company as a whole looks unattractive as a buyout candidate as well, for the same reasons.
We are still in a bull market, especially technology stocks, but i don't think the market is bullish enough regarding social media at this point to find a buyer willing to pay $10b for what might easily turn out to be the "next ICQ".

So I shorted some.

I am short SNAP stock.
This is only my opinion of course. I don't know the future. You should do extensive research on your own before making investment decisions.

[UPDATE: stopped out already, at 9.59]

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