What to Expect as Snap’s Lockup Period Expires

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Since its March initial public offering, Snap Inc. (NYSE: SNAP) has watched its share price fall by nearly 44% and the stampede out of the stock likely will get more thrilling Monday as all those shares that were locked up for five months become eligible to trade.

How many is that? According the pre-IPO filing, 1.157 billion shares, nearly half of which are held by directors, executives and other affiliates subject to limitations and 175.8 million Class A shares. Nearly 50 million Class B shares were held as outstanding stock options and restricted stock units, while another 27.25 million Class A shares issued as stock options issued after December 31, 2016, become eligible for sale as soon as their vesting period is completed.

Snap’s IPO priced the stock at $17 a share, above the expected price range, and got a first-day pop of 44% before closing the week up 59%. The company’s market cap at the IPO price was just over $24 billion, but ended the week north of $31 billion.

As of Friday’s close Snap’s share price was $13.81 and the company’s market cap was about $16.3 billion.

What happened can be summed up in one word: Facebook Inc. (NASDAQ: FB). The social media giant, which paid $1 billion for Instagram in 2012, succeeded in protecting that investment by cloning Snap’s features nearly as soon as the smaller company announced a new one.

Snapchat, the company’s signature application, remains wildly popular, but still trails Instagram in the number of daily active users by a score of 250 million to 166 million. Can Snap fight off its much larger competitor and return to its former glory? It pretty much has to, but how patient will investors be?

Snap has announced that it will release second-quarter results on August 10. Analysts expect the company to report a net loss per share of $0.14 on revenues of $189.23 million. For the current quarter, ending in September, analysts expect a net loss per share of $0.13 and revenues of $276.68 million. For the full year, estimates call for a net loss per share of $0.57 and revenues of $970.66.

In its first quarter as publicly traded company, Snap posted revenues of $149.65 million and a net loss per share of $0.20.

Snap’s shares traded down about 4% in Monday’s premarket session at $13.25, not far from its post-IPO low of $13.14. The stock’s high is $29.44, and the consensus 12-month target is $19.58.