Snap subpoenaed by DOJ and SEC on IPO disclosures, shares sink

Co-Founder and CEO of Snap Inc. Evan Spiegel speaks onstage during Vanity Fair New Establishment Summit at Wallis Annenberg Center for the Performing Arts on October 3, 2017 in Beverly Hills, California.Matt Winkelmeyer/Getty Images

• Snap revealed that it has responded to subpoenas from the DOJ and SEC on issues related to the company’s IPO disclosures, according to Reuters.
• Investors allege that Snap misled the public about how competition from Facebook’s Instagram service had affected the company’s growth, Reuters said.
• Snap has been struggling this year, under sustained pressure from Facebook and its sister app Instagram, as its user base has flatlined following its Snapchat app redesign.
• Watch Snap trade live.

Snap slid 4% early Wednesday after reportedly revealing that it has responded to subpoenas from the US Justice Department and Securities and Exchange Commission in response to information contained in its March 2017 initial public offering.

The social-media company said that “regulators are investigating issues related to the previously disclosed allegations asserted in the class action about our IPO disclosures,” according to a statement given to Reuters, adding that the DOJ is likely focused on disclosures related to competition from Instagram.

The previously unreported federal inquiries follow an ongoing shareholder lawsuit where investors allege that Snap misled the public about how competition from Facebook’s Instagram service had affected the company’s growth, Reuters added.

Snap, however, said its pre-IPO disclosures are “accurate and complete” and the lawsuit is “meritless.”

Snap’s stock has gotten whacked this year, plunging more than 60% since February — after Kylie Jenner’s infamous tweet blasting the Snapchat app’s redesign. Selling has since wiped out $13 billion of market value. 

Following the redesign, the Snapchat app has been losing popularity among users. And sustained pressure from Facebook and sister app Instagram has led to a huge problem to Snap —  a declining user base. The company said in its second-quarter earnings release, on August 7, that it suffered its first-ever decline in sequential daily active users. That trend last quarter the the company said its number of daily active users fell by 1%, and that it expects that figure will decline Q4.

Snap has fallen 48% this year, and is down 74% since going public in March 2017.

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