Snap, Twitter trigger US$35b rout in social media stocks
ANXIOUS investors are selling out of social media stocks on Friday (Oct 21), with the group losing about US$35 billion in market value in a broad selloff.
First came Snap’s disappointing results. Shares of the Snapchat parent plunged as much as 28 per cent after it reported its slowest quarterly sales growth ever, saying a decline in advertising spending continues to drag on results. It’s the latest hit to the stock, which is now down more than 80 per cent this year and trading at its lowest level since February 2019.
The weakness spread to its peers amid concerns that an economic slowdown is deepening and that could hurt companies that rely on digital advertising for revenue. Meta Platforms, Alphabet, Pinterest, and Trade Desk all tumbled.
Snap was the first of the big Internet companies to report, setting the stage for what investors can expect when larger players like Alphabet and Meta Platforms report next week.
The group is competing for a shrinking pool of advertising dollars as spiralling inflation and weaker economic growth is putting pressure on companies and consumer spending. Meanwhile, new rules from Apple that require all apps to get smartphone users’ permission to be tracked online have made it more difficult for advertisers to measure and manage their ad campaigns.
“Weakness in brand advertising appears to be the main source of the steep deceleration,” Brent Thill, analyst at Jefferies, wrote in a note. “It’s difficult to parse out how many of Snap’s issues are transitory.”
Meanwhile, news that US officials were discussing whether they should subject some of Elon Musk’s ventures to national security reviews, including the deal for Twitter, roiled its shares. Twitter, which had tanked as 16 per cent to US$43.91 in premarket trading, pared a bulk of those losses when the White House said it was not aware of a national security review for Musk’s ventures. It was about 4.5 per cent lower at the market open.
The stock’s wild ride since Musk announced his offer to purchase the social media platform in April has been on display throughout the year. On Thursday, the arbitrage spread on the proposed takeover was at its narrowest since the deal was announced, as Wall Street appeared increasingly confident that the deal would close. Now it’s on pace to fall further below Musk’s offer price of US$54.20, on concern that the deal may come under government scrutiny.
Adding to that heap of bad news for tech investors, the possibility that the US could consider expanding its China ban to some of the most powerful emerging computing technologies has put pressure on stocks across the group, with the Nasdaq 100 Index down about 0.4% Friday. BLOOMBERG
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