The U.S. Justice Department and Securities and Exchange Commission has subpoenaed Snap for details on its IPO. This comes even as Snap finds itself facing a lawsuit from shareholders who are unhappy with the way the company projected its rivalry with Instagram.
Speaking with Reuters, Snap said that the subpoena is “related to the previously disclosed allegations asserted in the class action about our IPO disclosures”
To refresh your memory, Snap went public in March last year, with shares spiking by as much as 40 percent on the opening day. At opening, the company had a market cap of $30 Billion, at present however, that cap has dropped down to a relatively measly $8.9 Billion. From what we can piece together, this has been in part due to Snap’s rivalry with Instagram, who has been hard at work copying Snap’s core features, and pushing out interesting features of its own.
It is this rivalry that some investors are claiming, was downplayed during Snap’s IPO. Which is rather strange considering that Snap was perfectly candid about the competitive business landscape it operates in before its IPO.
We face significant competition in almost every aspect of our business both domestically and internationally. This includes larger, more established companies such as Apple, Facebook (including Instagram and WhatsApp), Google (including YouTube), Twitter, Kakao, LINE, Naver (including Snow), and Tencent, which provide their users with a variety of products, services, content, and online advertising offerings, and smaller companies that offer products and services that may compete with specific Snapchat features. For example, Instagram, a subsidiary of Facebook, recently introduced a “stories” feature that largely mimics our Stories feature and may be directly competitive. We may also lose users to small companies that offer products and services that compete with specific Snapchat features because of the low cost for our users to switch to a different product or service.Moreover, in emerging international markets, where mobile devices often lack large storage capabilities, we may compete with other applications for the limited space available on a user’s mobile device. We also face competition from traditional and online media businesses for advertising budgets. We compete broadly with the social media offerings of Apple, Facebook, Google, and Twitter, and with other, largely regional, social media platforms that have strong positions in particular countries.
And at the very least, investors are expected to follow the news of their assets. And news outlets were pretty vocal about how Instagram had been hard at work copying Snap’s features, adding its own flavor to them, and launching them. So blaming Snap for downplaying its rivalry with Instagram, looks more of an attempt to find a scapegoat than anything else.