Snap trims earnings losses after Tencent announces a 10% stake

On Tuesday, Snap reported revenue and user growth that was much lower than Wall Street expected and the stock cratered shortly after. Shares rebounded when traders realised that Snap had announced that Tencent, the Chinese company behind WeChat, had acquired a 10% stake in the company.

The stake counted as a vote of confidence for Snap and helped it claw back some of its post-earnings losses. Shares were down as much as 20% after the disastrous earnings report but settled higher at about 10.25% lower than Tuesday’s closing price.

Tencent acquired 145.8 million shares of non-voting stock on the open market in the third quarter, according to Snap’s quarterly report. Tencent had previously invested in Snap, and recently picked up a 5% passive stake in Tesla worth about $US1.78 billion.

Snap is down after reporting revenue and user numbers far under expectations. The company posted an adjusted loss of $US0.14 per share, vs. Wall Street’s expectations of a $US0.15 per share loss on revenue of $US207.9 million vs. estimates of $US235.5 million. Snap only added 4.5 million new users in the quarter, up 3% from the previous period to 178 million daily active users.

Snap also took a $US40 million write-down on its first hardware product, Spectacles. Half of Spectacles users weren’t using the glasses one month after purchase, according to the company.

Snap is trading at $US13.55 Wednesday morning, about 21.17% lower than its IPO price of $US17.

Read more about the company’s disappointing earnings result here.

Get the latest Snap stock price here.

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