Snap Under Fire In The Headlines; Investors Shrug

Snap Inc SNAP has weathered some fairly negative headlines in the past 24 hours, but shares have been unruffled. The muted reaction by Snap investors suggests shareholders are more focused on the long-term Snap story than short-term bumps in the road.

Downsizing

On Thursday, Cheddar reported that Snap laid off about two dozen employees, mostly in its content division. Layoffs are never what investors want to see from a company that is supposedly in the early stages of a long-term growth story.

Snap fired about a dozen employees in its hardware division in September and 18 recruiters in October. It has also said it will dial back its hiring in 2018.

Snap has also been slow to roll out its new Snapchat platform redesign, which it initially planned to make available in December.

Former Employee Alleges Inflated Numbers 

On Thursday, Mashable reported that former Snap employee Anthony Pompliano said he has "proof" that Snap has reported fraudulent numbers to investors.

“And they continue to attempt to silence me by pushing this case into arbitration, out of the public eye, but I’m not going anywhere, and they may have made disappearing photos famous, but they cannot make facts disappear,” Pompliano told the publication. 

Pompliano’s accusations come after cofounder Evan Spiegel took some heat for saying the Snapchat app was “approaching” 100 million daily active users back in May 2015. Snap’s S-1 filing in June 2015 revealed 89 million daily active users.

There’s no question Snap has had a rough go of it since its highly publicized 2017 IPO. The stock is now trading at around $14, down 13 percent in the past month and 21.4  percent below its $17 IPO price. The stock has also been hit by downgrades from Cowen, Jefferies and Raymond James within the last two weeks. 

Silver Lining

However, even after the two brutal headlines on Thursday, Snap stock is trading mostly flat on Friday morning, a phenomenon that could be extremely good news for investors.

Even after the Thursday headlines, Snap was trading up 0.71 percent at the time of publication at $14.11. 

When stocks stop reacting to bad news, it can mean that selling pressure is exhausted — a sign of a bottom in a heavily sold stock. Snap traders will now be watching closely for any signs of a reversal.

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