Activist investor Irenic Capital Management has built a position in social media company Snap and is pushing for changes to improve financial and operating performance, according to people familiar with the matter, Bloomberg News reported.
The investor sent a letter to Snap Chief Executive Officer and co-founder Evan Spiegel, outlining its views it hopes could boost the company’s shares to more than $26 each, the people said, asking not to be identified because the matter is private. Irenic’s economic interest in Snap’s Class A shares is around 2.5%, the people added.
Snap’s shares jumped 8.3% in morning trading.
“We bought Snap because we think the social network you built is an extraordinarily valuable asset – whose strategic value is only increasing,” Irenic said in the letter, which was reviewed by Bloomberg News.
Irenic recommends spinning off or shutting its smart glasses business Specs, which it argued, with $3.5 billion already sunk into it, should “be funded on its own” by now. Snap announced in January that it would create a standalone subsidiary dedicated to Specs.
Michael Lynton, chairperson of Snap’s board responded in a statement that “Snap welcomes input from all shareholders and regularly engages with investors on strategy, capital allocation, and governance.”
He added that the board and management “are focused on building a more efficient, profitable business while investing with discipline in our long-term roadmap.”
He said the company has “taken steps to improve performance, strengthen free cash flow, and offset dilution, and will continue to evaluate actions that drive long-term value for all stockholders.”
The hedge fund also proposes that Snap should rationalize its cost structure by cutting its workforce and changing its compensation structure for employees.
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