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By Justin Lane / EPA / REX / Shutterstock.
After refusing an offer of Mark Zuckerberg, who wanted to acquire Snapchat for $ 3 billion in 2013, Snapchat C.E.O. Evan Spiegel had to face the very real possibility that the Facebook C.E.O would devote considerable resources of his company to the suppression of Snapchat. Zuckerberg began to do so, copying Snap's features ruthlessly with remarkable success: in June, Instagram announced that its Stories feature had attracted 400 million daily users, while the number of active users Snap daily was about 191 million in the first quarter of the year. 2018. Reports suggest that Snapchat members were well aware of the potential of Instagram for lunch. But whether Snap has revealed the extent of these concerns to investors is now a topic of interest to the US government.
On Tuesday, Reuters announced that the Securities and Exchange Commission and the Justice Department had summoned Snap on charges that it would mislead investors by not revealing Instagram's potential for hurting growth. from Snapchat. "We understand that these regulators are investigating matters related to the previously disclosed allegations that have been claimed in the class action in our I.P.O. disclosures, "said the company in a statement. "Although we do not have full visibility on these investigations, we understand that the OJD. is probably focused on I.P.O. Instagram competition disclosures. It is unclear what triggered S.E.C. and D.O.J. requests, but last week the government filed a sealed case in a lawsuit in a federal court in Los Angeles, in which investors allege that before going public, Snap minimized the risk of competition from Facebook .
The prosecution also alleges that Snap failed to disclose a sealed whistleblower action prior to his I.P.O. case, in which a former employee alleged that Snap had misrepresented his active daily user numbers. The company denied both allegations, saying in a statement: "We continue to believe that the claims of the class action are unfounded and our I.P.O. the revelations were accurate and complete. In April, a federal court ordered the whistle-blower to go to arbitration, and in June a judge denied Snap's motion to dismiss the complaint. The company announced that it would continue its cooperation with the Department of Justice and the SAC. Snap shares fell on news: on Tuesday, they closed at $ 6.71 and Wednesday at around $ 6.60.
The twin D.O.J. and SEC Probes are the latest data on what appears to be a downward spiral for Snap, which has seen its consumption growth slow down considerably in the last 18 months, despite reduced losses and growth in sales higher than expected. The company is also facing an exodus of its leaders – earlier this week, its VP content, Nick Bell, he's separated from the company as part of a "planned reorganization" of his content team. Employees are also looking for a solution: according to a recent survey, 40% of Snap's approximately 3,000 staff members said they planned to leave the ship. It remains to be seen whether the government's investigations have merit – in August, several people "familiar with Snap's operations" told Bloomberg that Spiegel "refused to believe that [Instagram tories were] contributing to a slowdown in growth, "but society has disputed this speech, highlighting both its I.P.O report. prospectus and the fact that Spiegel has already discussed the competition of Instagram. Whatever the case may be, another strike against Snap in the eyes of investors could not come at the worst time for the ceding company.
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