Snap is getting destroyed because of its ‘unwillingness’ to work with Wall Street

Michael Nagle | Bloomberg | Getty Images

Evan Spiegel, co-founder and chief executive officer of Snap Inc., stands on the floor of the New York Stock Exchange during the company’s initial public offering on Thursday, March 2, 2017.

Wall Street analysts continue to set a very high bar for Snap because the Snapchat-parent won’t give them any clues where to place it.

Shares of Snap plunged 11 percent in Friday premarket trading after the company reported worse-than-expected second quarter results, with the number of users added both fewer than anticipated and at a slower rate than the previous quarter.

One quarter ago, in its first ever earnings report as a public company, Snap reported a revenue and user growth miss and the stock plunged 20 percent.

“The company’s reluctance to provide guidance is driving the Street to make unachievable forecasts. This is turning strong quarterly performances into disappointments,” Drexel Hamilton analyst Brian White wrote in a note.

The lack of playing the guidance game is the latest example of Snap wanting Wall Street’s money, but not wanting to play by Wall Street’s rules. Snap still remains at odds with index firms and investors over its multiple-class share structure that fails to give most shareholders a voting stake.

Jefferies analyst Brian Fitzgerald echoed White, saying that “even an overly conservative guidance would be appreciated” by shareholders, even if they don’t have any say.

“Snap’s unwillingness to provide Street guidance will continue to be a disservice to shareholders as estimates continue to fluctuate wildly and it introduces unneeded uncertainty into results,” Fitzgerald wrote in a note.

The self-designated camera company is the latest extreme example of a trend where companies list publicly with a multiple share class structure. Seen in other technology stocks like Facebook and Google, companies’ founders are able to retain a disproportionate level of control compared to how many shares they have.

Two index providers, the S&P Dow Jones and FTSE Russell, banned Snap shares from their indexes because Snap sells only shares that give investors no votes, meaning the index providers have zero control.

Snap’s co-founders, CEO Evan Spiegel and chief technology officer Bobby Murphy control “all stockholder decisions,” according to regulatory filings, while shares listed on the stock exchange are non-voting stock.