Snap running out of cash, report says

Messaging app firm’s shares fall 6.4%

Evan Spiegel, Snap Inc.’s chief executive, wants his struggling company to reach profitability next year. Before that, he has to address new concerns that the Santa Monica, Calif., firm is depleting its cash.

Snap shares slid 6.4 percent on Tuesday to close at a new low of $7 after an analyst said the company behind the Snapchat video messaging app was “quickly running out of money” and may need to raise new funding next year.

“Running Snap’s business has been a significant cash drain,” said the report from Moffett Nathanson, a media and telecom research and analysis firm. “If the current cash burn holds, Snap will need to raise new funding in the back half of 2019!”

That would mark a significant blow for the company, which has faced a steady string of setbacks and challenges since its blockbuster initial public offering in March 2017.

Chief among them has been Snap’s inability to meaningfully expand its user base in the face of stiff competition from Instagram, the video and photo app owned by Facebook Inc. Another is a deeply unpopular redesign that alienated some of Snapchat’s most ardent users.

Snap has experienced some high-profile departures. Its chief strategy officer, Imran Khan, told employees in an email last month that he would leave Snap after helping find his replacement. Nine executives have departed from the company since its IPO.

In the Moffett Nathanson report, analyst Michael Nathanson wrote that he expects Snap to fall far short of its goal of profitability next year as it tries to attract more users to Snapchat.

“While it is not surprising to see costs outweigh revenues for companies in hyper-growth mode, is Snap still considered to be one of these trailblazing companies?” Nathanson wrote. He said Snapchat might be reaching its peak as its daily active users, a key metric, fell in North America and all other markets in the second quarter of this year.

“We do not see Snap reaching profitability in the near future unless there are substantial expense reductions,” Nathanson said. He estimated a loss of more than $1.5 billion in 2019.