By: Zack Duvall
In a surprise twist of fate, the seemingly popular and thriving social media company, Snap Inc., saw its targeted sale price substantially lowered by lead underwriter, Morgan Stanley, to $16 a share, one dollar less than the March IPO sale price. The company’s inability to capitalize on potentially new and innovative ad revenue for the platform, was cited as the key reason for investment bank Morgan Stanley’s decision to make the change.
“We have been wrong about Snap’s ability to innovate and improve its ad product this year.” Brian Nowak, lead analyst associated with the decision from Morgan Stanley, said in a statement about the news from the bank.
Company shares dropped 9% and closed at $15.47 on Wednesday, after a heavy trading day, even lower than the $16 target price and 47% lower than the March IPO.
“There’s a lot of people betting that this stock is going down, and I think this analysis is just adding fuel to the fire.” King Lip, a chief investment officer with Baker Street Asset Management Group based in San Francisco, said of the news Wednesday evening.
Morgan Stanley also changed the rating of the stock to “fair weight” from “outperform”, and officially cut the target price from $28 to the $16 it has remained listed at. All of this comes a shock to many experts on Wall Street due to the fact that this it is an extremely rare move for an underwriter to take such actions so soon after an initial IPO.
Goldman Sachs, the minor underwriter of the stock, still has a “buy”rating on the stock and hasn’t changed its $27 target price the company set for Snaps shares in March.