Snap gets hit with a downgrade as analyst says it may need to give out more stock to keep key employees

GettySnap CEO Evan Spiegel
  • Snap was downgraded at Pivotal Research after analyst Brian Wieser said it may need to give out more stock to keep key employees.
  • The social-media company has recently seen a string of executive departures as it contends with large financial losses, a plunging stock price, and a declining user base.
  • Snap management in December decided to not give employees cash bonuses for the second straight year, replacing them with stock-based compensations.
  • Watch Snap trade live.

Snap faces an incremental downside risk as it may need to give out more stock to keep key employees, an analyst says.

“Concerns we have long held around employee churn are playing out,” said Brian Wieser at Pivotal Research Group. “Significant additional stock grants to key employees may be necessary despite their diluting effects.”

The social-media company has faced a string of executive departures over the past few months as it contends with large financial losses, a plunging stock price, and a declining user base.

Most recently, Elizabeth Herbst-Brady, Snap’s head of global strategic partnerships, has decided to leave the company after two years. Her departure follows Imran Khan as chief strategy officer, Drew Vollero as chief financial officer, Jeff Lucas as head of sales, and others.

Snap has a history of giving out executives a massive amount of stock awards. The company’s annual report revealed CEO Evan Spiegel received a $US637 million stock award at the time of the company’s initial-public-offering. Khan was also granted $US637 million shares in January 2017, mere days before Snap went public.

In December, management decided to not give employees cash bonuses for the second straight year and replace them with performance-based bonuses in the form of stock options. That came as the company faced brutal selling recently, sinking below its lowest record for multiple times.

Considering that Snap may issue more stock-based compensation to key employees in the near term, Wieser lowered his rating from “buy” to “hold,” and slashed the price target from $US8 to $US6 – slightly below where shares were trading on Monday.

Snap was down 56% in the past year.

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