What can Snap do now to regain momentum after this spree of setbacks?
Snap has been rejected from the stock market index S&P 500 after also failing to be eligible to enter the FTSE Russell, and it is not the first time the company has had difficulty entering an index.
The company could not gain entry to the S&P 500 because it operates using multiple share class structures, and this format has been banned by a new set of rules that listing companies are subject to.
Snapchat’s parent company was ineligible to join the FTSE Russell index because its investors do not have voting rights, a means by which investors can have a say in the activities of the company within which they have placed their money.
At the beginning of the week Snap shares dropped by around 5% as the lockup period attached to the company’s Initial Public Offering (IPO) expired, meaning that early investors became free to sell their shares.
Earlier this year a blow was delivered to Snap when shares tumbled by 12% because investors were disgruntled due to this lack of voting rights that continues to be problematic. This prompted representative bodies behind investors aiming to have the company kept out of some stock market indexes.
Snap has also had difficulty in accessing the MSCI index in the USA, having at first been granted access, only for this to be overturned a day later, putting back the final decision for months.
Before Snap made its IPO, attitudes towards the company’s potential was buoyant, as its business model was in place. The ability held by Snapchat to provide advertisers with insight based on user data is a central feature that has drawn interest to the app.
In 2016 the company suffered a net loss of $514.6 million, while still achieving revenue of $404 million. Snap accrued a $373 million net loss the year before in 2015. These instances however do not compare to the current difficult situation faced by the company.