July 11, 2017
Alex Wilhelm is the Editor in Chief of Crunchbase News, covering the intersection of startups and money.
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Morning Report: Snap follows other recent unicorn IPOs into negative territory. Here’s how expensive its shares stack next to its market peers.

Snap’s stock dropped today after one of its underwriters downgraded shares in the social company, lowering their share-price target from $28 to $16. Snap, which went public for $17, is now worth just $16, off $0.99 today or 5.8 percent.

Of course, Snap isn’t our only recent stumbling unicorn. Tintri had to give up its unicorn status when going public and has fallen beneath its delayed-and-lowered IPO price. Blue Apron had to dramatically reprice itself to get out the door, and since the repricing, its IPO has fallen by nearly 25 percent. With Snap, you have a consumer goods unicorn, a social app unicorn, and an enterprise cloud unicorn all in trouble at the same time.

But despite Snap instantly falling to that new $16 guidance, the company has quite a lot of proving to do. Snap’s equity is worth more per dollar of revenue than Twitter and Facebook, because it is growing more quickly on a percentage basis.

How much of a premium that fact commands, however, is worth noting. Even after its recent declines, Snap is quite expensive. Using some trailing metrics from Yahoo Finance, here’s Snap, Facebook, and Twitter’s current price/sales multiples:

  •  $SNAP: 36.63
  • $FB: 14.75
  • $TWTR: 5.42

Ah, I can hear you saying: “This might make some sense! Snap isn’t even three times as expensive as Facebook, by this metric. And it’s growing so much more quickly! That can add up.”

Maybe, but bear in mind that Facebook is intensely profitable — and was before its IPO, mind — and has shown an ability to continue accreting users to its platform while far older than Snap. So the comparison is a bit lacking, especially in the wake of Snap’s lackluster Q1 user gains.

And that’s why we included Twitter. Twitter’s price/sales multiple is what happens to a social company that stalls out, but does so at a decent userbase and firm place in the global media landscape. But if you reprice Snap using Twitter’s multiple, you end up with a much smaller Snap. That wouldn’t be fair either, given the differing revenue growth patterns from each, but you get the point.

Snap is having the sort of day that many didn’t think it would ever have, let alone so quickly. And it isn’t alone among unicorns. That’s about as bad news as can be for those in favor of more startup liquidity.

From the Crunchbase Daily:

US venture spending ticks up in Q2

Venture investment in U.S. startups rose sequentially in the second quarter, boosted by mega-sized tech and healthcare rounds. Overall, Crunchbase projects that U.S. startups raised $22.7 billion in Q2 of 2017, up from $20.6 billion in Q1 and about flat with Q2 of last year. For committed data geeks, we’ve also compiled a bunch of charts from our quarterly global VC report.

Faraday Future halts factory plans

Electric vehicle startup Faraday Future halted plans to build a $1 billion factory in Nevada amid mounting financial troubles, according to media reports. Instead, three-year-old Faraday, which is backed by LeEco founder Jia Yueting, plans to move production to a much smaller facility.

Darktrace raises $75M

Cybersecurity startup Darktrace raised a $75 million Series D financing round led by Insight Venture Partners and joined by existing investors. The funding follows a growth spurt for the four-year-old company, which has doubled its staff over the past year.

Brandless launches after raising $50M

Brandless, an e-commerce startup that sells food, beauty and home products for $3 each, has launched its first product lineup. Along with the launch, Brandless disclosed that it raised a $35 million Series B round led by New Enterprise Associates.