Snap: We've blown $3bn this year and Tencent wants to give us more Nose-diving social media company Snap Inc. says it has secured a significant investment from Chinese tech powerhouse Tencent. The photo sharing company slipped the disclosure into yesterday's remarkably poor quarterly earnings report, saying the 145 million shares were a non-voting stake and would not be subject to much …
I don't see how "acquired 145,778,246 shares of our non-voting Class A common stock via open market purchases" leads to "help fund a revamp of its Snapchat service to be easier to use". Open market purchase implies they bought from people who are NOT Snap, and thus Snap received no money with which to revamp anything. Have I missed something?
If they were on the open market then they weren't from Snap. That kind of sale would have to have been accounted for in the balance. Just goes to show how poorly most people understand the stock market.
Looks much more like TenCent is taking advantage of Snap's weak shareprice to move capital to the US. An inversion at some point is possible.
This doesn't really make much sense. If the Tencent purchases were made on the open market and Snap was not aware of them until notified, then in all likelihood the money went to existing holders of the stock. That wouldn't fund anything at Snap; only if new shares were issued would there be new money coming into the company's coffers. Reading the 10-Q, they for no obvious reason refuse to provide information on cash from financing activities for the previous quarter, only (uselessly) for the previous 9 months, but there's nothing here to suggest that new A shares were issued to Tencent for consideration. I doubt very much that this stock purchase helps Snap in any way.
And this is exactly why capital gains on stocks purchased on the secondary market should be fully taxable as income. You are not helping a company grow by buying shares unless you've bought them directly from the company.
But if you invest in a company pre-IPO, then you should get some tax advantage for helping a company when the risks were higher and when your investment actually goes to the company.
For the calendar year, Snap told investors it has racked up a staggering $3.1bn in losses
So just like their app, the money comes in and vanishes sometime later with nothing to show for it in the end.
I'd also like to point out that four years ago, almost to the day, Snap turned down both a $3billion offer from Facebook and a $4billion offer from Tencent to buy them. (https://www.theregister.co.uk/2013/11/13/snapchat_laughs_off_facebook_buyout_offer/)
The IPO gave investors a much bigger payoff than previous offers.
With anything "webscale" nowadays only an offer > $ 10 bn seems to get VCs interest. You could have an app that counts farts (or something even less interesting) and as long as you have enough users (> 200 million seems about the threshold) then investors will be desperate to hand over somebody else's pension pot to get a bit of the action.
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