Activist target Snap has massive turnaround potential
The bull case for Snap is that its deeply depressed valuation and sticky user base make it a prime candidate for a dramatic turnaround under activist pressure.
The argument
An activist firm, Irenek Capital Management, acquired a 2.5% stake in Snap's Class A shares and laid out a specific path to a $26.37 share price (up from ~$4). The speakers noted that despite a 94% drawdown and terrible historical monetization, the app's high engagement among younger demographics provides a foundation for a Carvana-style recovery if management can be convinced to optimize operations.
The thesis, stress-tested
✓ What validates it
- ✓Management adopting operational recommendations outlined in Irenek Capital's presentation
- ✓Improvement in average revenue per user (ARPU) and path to profitability in upcoming earnings reports
▸ Risks discussed
- ▸The founders control over 95% of the voting power through a tri-class share structure, meaning the activist has no actual voting power to force change
- ▸Historically high stock-based compensation that dilutes public shareholders
Hear it yourself
"Snap should be worth a lot more than $7,000,000,000. In our presentation, we outlined a path to $26.37. Very specific. Call it the false precision of investment analysis versus today's $3.93 stock price."
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