More bad news for Snap.
The social media company said Tuesday that it planned to cut 20 percent of its 6,400-employee workforce. The news knocked the stock down another 2.5 percent to close at $10.01. The shares are now down nearly 80 percent for the year and almost 90 percent from their September 2021 high.
The stock was nearly halved on May 23 alone when Snap CEO Evan Speigel warned that the company would miss its own revenues and adjusted earnings targets in the second quarter.
That may be when, or why, several of the largest quantitatively driven hedge funds initiated huge positions in the stock or added to existing positions in the second quarter, while other high-profile, fundamentally driven hedge funds also initiated sizable positions.
Apparently, the computers at all the quant firms gave the same buy signal. For example, two different entities of Two Sigma — Two Sigma Advisors and Two Sigma Investments — initiated especially large stakes in the second quarter, purchasing a combined 24.6 million shares, according to regulatory filings. Altogether, the quant giant owns 1.8 percent of the total outstanding shares, according to the filings.
Renaissance Technologies bought more than 8 million shares in the second quarter, boosting its stake by more than three times to 11.3 million shares.
D.E. Shaw — which is no longer exclusively a quant — bought more than 4 million shares and now owns about 10.6 million shares.
In addition, two Tiger Management descendants not known for using computers to make investment decisions also established sizable stakes in Snap in the second quarter. Philippe Laffont’s Coatue Management bought about 2 million shares, while David Greenspan’s Slate Path Capital purchased more than 1.9 million shares.
To put these purchases into perspective, none of these firms currently count Snap among their top-10 holdings. Even so, the slew of high-profile hedge fund investors who made big purchases in the second quarter are no doubt betting that things couldn’t get much worse for the company, which has been one of the worst-performing internet stocks of the past year. News of the huge layoffs, however, is a reminder that it is very hard to bottom fish, even after a stock drops more than 80 percent.
According to Bloomberg, the company, which has been badly hurt by a reduction in advertising spending, told investors in July that it won’t provide guidance for the current quarter due to a lack of visibility. The company is now focusing on growing the number of users, finding new sources of revenue, and improving its direct-response advertising business.
Now the question is whether the high-profile hedge funds will be rewarded for showing faith in the company’s new strategy.
