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Snap shares jump as IPO insiders encourage buying or holding the stock

Snap shares jump as IPO insiders encourage buying or holding the stock
Snapchat's logo hangs on the facade of the New York Stock Exchange. (Justin Lane / European Pressphoto Agency)

Shares of Snapchat maker Snap Inc. jumped Monday, closing at their highest price in three weeks.

The leap — shares rose $1.09, or 4.8%, to $23.83 — followed several stock analysts' new recommendations to buy or hold on to shares of the Los Angeles company.

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The analysts had been barred from publicizing their calls until Monday because they worked at banks that helped sell stock during Snap's initial public offering this month. Banks typically wait about 25 days after a company's IPO before discussing the company in order to avoid sharing information selectively or saying anything that swings prices during the volatile early days.

Snap shares tumbled after the company recorded Southern California's largest-ever IPO and debuted in public trading at $24 a share. Analysts not involved in the IPO mostly gave Snap negative recommendations, and short-sellers betting against the company bought up a large of block of shares. The concerns largely stemmed from the Snapchat app's slowing user growth and from growing competition from Facebook.

Monday's reports balance out the ratings: According to FactSet, five analysts now say to hold on to Snap shares, six say to buy the shares and five essentially recommend dumping them.

Among those newly weighing in was Jason Helfstein of Oppenheimer & Co., who addressed fears about Facebook copying Snapchat features by saying that on Snapchat, users have fewer but closer connections than on Facebook.

"Competitors will copy the lenses, filters and video formats, but [Snapchat's] unique social graph is equally important to the user experience," he said. "Platforms already tainted by 'over-friending' will always be imperfect imitators."

The most bullish recommendation came from RBC Capital Markets' Mark Mahaney, who suggested shares could hit $31 next year even if the company takes a while to generate a profit.

"We believe that if [Snap] sustains its current level of innovation, it can sustain premium growth for a long time and scale to profitability," he said.

Snap shares could see notable movement again soon when it releases its first quarterly financial report as a public company.

There's also potential for a big swing if key indexes, such as the Standard & Poor's 500, exclude Snap because its publicly traded shares have no voting power.

Several investor advocacy groups, most recently the Investment Assn. in Britain, have called on index managers to keep Snap off because they consider it too risky not to have a say in choosing board members, executive compensation and acquisitions. Many funds invest based on what's included in indexes, making the forthcoming decisions crucial.

Twitter: @peard33

UPDATES:

1:25 p.m.: This article has been updated with Monday's closing stock price.

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The article was originally published at 10:25 a.m.

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