Feds Subpoena Snap Over IPO Disclosures
"Snap!" is an expression to use when you get shocked or surprised, according to the urban dictionary.
But that's not what they were thinking at Snap, Inc. when the camera company started in 2011. The founders were focused on building Snapchat and other tech products.
Now they are urban-thinking "snap," however, because federal authorities have subpoenaed information about the company's initial public offering. According to a class-action lawsuit, Snap misled investors.
The company said in a statement that it has been responding to subpoenas from the Securities and Exchange Commission and the Department of Justice. The regulators want to know more about its disclosures during its IPO last year.
The company closed up 44 percent that day, accounting for about 10 percent of the total trades on the New York Stock Exchange and putting the company's market capitalization at about $33 billion.
In the class-action, investors allege Snap misled them about user growth. The lawsuit pointed out that the company's stock fell more than 20 percent after its first quarter report showed disappointing user numbers.
Snap says the lawsuit is "meritless," and that its disclosures were "accurate and complete."
According to reports, the federal regulators are also looking into Snap's disclosures about competition from Instagram.
Facebook, which owns Instagram, has grabbed users by copying Snapchat features. Using such features, Mashable said, Instagram is now more popular and growing faster than Snapchat.
After news of the federal subpoenas, Snap stock dipped more than 3.4 percent. That was down more than 70 percent from the IPO.
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