Snap’s ‘Lockup’ Period Ends, as Its Moment of Truth Quickly Approaches

Hundreds of millions of Snap shares are now available — but the real fireworks are coming in August

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Its now easier to get your hands on shares of Snap — the parent company of messaging app Snapchat — even though it wasn’t that hard to do last week, as the company continues to slide into its Q2 earnings.

Snap’s “lockup” period, barring early investors and employees from selling their shares for six months following its IPO, just wrapped up. For those lucky enough to jump into Snap in its nascent stages, this is an opportunity to turn their stock options into real cash. With the moratorium lifted, the market will now be flooded with Snap stock —  nearly quadrupling its current float of 230 million shares.

And so far, Wall Street isn’t rushing to grab shares, with Snap down about 0.5 percent on Monday morning.

But the lockup expiration’s full impact won’t be felt for another few weeks. That’s because Snap’s in a blackout period heading into its upcoming second quarter report on Aug. 10 — preventing any employees from selling shares. Q2 earnings is quickly becoming a moment of truth for Snap; post another few months of lackluster user growth and anemic advertising numbers, and Snap could be headed for a tailspin. Employees and institutional shareholders looking to salvage their small fortune would be emboldened to offload their stakes — driving its share price lower.

And that’s after an already tough stretch for Snap, with its shares down 22 percent in the past month. Snapchat’s main rival, Instagram, continues to copy its best functions and see its efforts pay off in spades. Instagram Stories, its clone of Snapchat’s 24-hour video and picture bulletin board, now has more than 250 million daily active users — easily lapping Snapchat’s 166 million DAUs.

On the other hand, though, Q2 earnings is an opportunity for Snap to rise to the occasion. Despite the pelting its taken and the abysmal Q1 report, there are signs Snap is moving in the right direction. Its upped its focus on international growth, started selling its Spectacles sunglasses on Amazon, and doubled down on its advertiser tools with a recent acquisition. Time Warner just inked a $100 million deal with Snap to create original shows and place ads. Most importantly, though, is its growth as a media platform. Snapchat just debuted a daily news show with NBC News and is set to roll out more original content in the second half of 2017.

If it fixes its revenue void and continues to draw Snapchatters with innovative content (both big “ifs”), Snap’s lockup period could be much less painful than anticipated.