When Snap Inc (NYSE:SNAP) launched its IPO back in March there was a lot of optimism as the share price jumped to nearly $30 in just its second day of trading. However, at less than $14 a share it is trading at less than half that amount and has declined more than 44% since it began trading.
The company recently announced that it is going to make a significant redesign to its app where content from friends will be on one side of the app, while content from publishers and brands will be on the other side, the discover part.
The content that will populate the discover section will be vetted and approved by the company to meet its standards. This change will help to eliminate fake news and inappropriate content. With Facebook Inc (NASDAQ:FB) coming under fire for fake news this is a way for Snap to differentiate itself from the social media giant and demonstrate to its users how it can be a more trusted brand for news and media content.
The obvious problem is that the vetting process could be time consuming and costly, depending on how rigorous it will be. Snap is already deep into the red and has failed to even come close to breakeven, and adding more resources and costs to its app isn’t likely going to help unless the company believes it will bring in significantly more users.
I would wait to see what impact this has on the company’s active users before buying the stock, as the gain could be minimal while costs might not be.
