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Financial News

Feb 23, 2018

Kylie Jenner’s Tweet Shakes Snapchat

By Stash Team

Trending: News and influential people can have big and unexpected effects on markets.

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Trending news: The disappearing message app Snap ran into some unexpected trouble on Thursday, following a single tweet from Kylie Jenner.

The reality TV star and social media influencer, of Kardashian family fame, threw far-reaching shade, questioning whether anyone really uses Snap anymore.

By Thursday afternoon, Snap’s market cap had lost $1.2 billion, or approximately 10% of its value*.

Here’s what Jenner tweeted:

The tweet got more than 300,000 likes and over 60,000 retweets.

A short while later, Jenner backtracked and wrote:

News and influential people can affect stock prices

Snap’s Jenner snafu is actually an important lesson for anyone investing in the stock market. Current events, economic news, and the public comments of powerful people can all affect stock prices.

You may remember that shortly after Donald Trump was elected president in 2016, his tweets about aerospace defense titan Boeing caused the company’s share price to skid temporarily. In Boeing’s case, Trump seemed to suggest his administration might cancel a contract for a new, multi-billion dollar Air Force One, slated to be built by the aerospace company.

Investors might have taken Jenner’s vote of no-confidence as a sign that the platform may be losing its appeal with its target audience.

In Snap’s case, Jenner is an important social media influencer who represents the age group most likely to use the app. Investors might have taken Jenner’s vote of no-confidence as a sign that the platform may be losing its appeal with its target audience.

In 2017, Jenner hosted a series on Snapchat called “Ask Kylie” where she fielded questions from fans about her career, family drama, and breakups.

What is a market cap?

The stock market value of a company, also referred to as its market cap, is one way to gauge a company’s total worth to investors.

To arrive at a company’s market cap, you multiply the number of shares it has made available to the public for sale, by the most recent stock price. In Snap’s case, it has 661,834,416 shares outstanding, according to the Nasdaq.

The day before Jenner’s tweet, its stock traded at a high of approximately $19 a share. Following the tweet, its shares sank as low as $17.15*.

Here’s how you do the calculation:

661,834,416x$19=$12.6 billion

661,834,416x$17.15=$11.4 billion

The difference between the stock high on Wednesday and it’s low on Thursday translates into a market cap loss of approximately $1.2 billion, which represents a decrease of about 10%.

Snap: The bigger picture

Jenner, who has 25 million followers on Twitter, is certainly an important social media influencer. But stock analysts are quick to point out that Snap’s performance has been uneven in recent months.

Snap’s share price has been on something of a roller coaster of late. Just last week, following a strong fourth quarter earnings report, Snap’s share price increased 40% in a day.

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Still, financial experts have also questioned Snap’s ability to continue growing. Earlier this week, a Citigroup analyst downgraded the stock to “sell” from a “neutral” rating, citing negative comments about the app’s recent redesign, which could cause user growth to fall, Bloomberg reported.

More than 1 million angry users signed a petition telling Snap to change the redesign because it made the app too difficult to use, according to Reuters.

Cosmetics company Maybelline sent out its own tweet about Snap on Thursday, asking its 665,000 followers if the company should still use the platform to communicate with customers, but later reportedly deleted the tweet.

More about Snap:

  • At the time of Snap’s IPO in 2017, it was one of the most richly valued Internet startups since Facebook, with a market value of $24 billion.
  • Back in November, China’s Tencent, the Internet services giant, swooped in and purchased an additional 12% of the company in after hours trading. It was an early investor in Snap.
  • Snap is still not profitable. It reported a net loss of $350 million in the fourth quarter. It reported a total net loss of $3.4 billion for the full year 2017.

Written by

Stash Team

*Source, Yahoo Finance, Friday, February 23


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