Snap Inc. tried to turn Big Investors into zombies. It didn’t work. Snap Inc., the parent of Snapchat, was dealt another blow today. FTSE Russell, which owns numerous indices for stock markets around the world, including the US Russell 3000, 2000, and 1000 indices, said today that it would exclude Snap from its indices because of Snap’s share structure that denies public investors the right to vote.
Though Reuters reported the story after the market had already closed, the shares of Snap fell 3.5% today to $13.40, a new all-time low.
Shares are now 21% below the IPO price of $17. Back then, on March 2, Snap was considered ‘too big to fail.’ It would have such a massive market capitalization that it would be included in all major indices, including the S&P 500 and the MSCI USA Index. Fund managers would be forced to buy Snap shares to keep their funds in line with the indices. Given the relatively small number of shares traded, this buying pressure would push up the price even further. It was simply a matter of creating a lot of artificial demand.
This post was published at Wolf Street on Jul 26, 2017.
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