Shares of Snapchat parent Snap Inc. fell more than 5% Monday after President Donald Trump backed a deal for Microsoft to acquire TikTok.
The slide to about $21.20 came on double the stock’s average trading volume and on a day when most media and tech issues finished in positive territory. The last time Snap shares were this low was June 16.
Trump said Monday he supports Microsoft acquiring TikTok, given it is a “big company, a secure company, a very American company,” though he didn’t rule out another buyer entering the fray. Trump and his administration have objected to TikTok’s wildly popular social media platform because of security concerns about it and Chinese parent company ByteDance.
TikTok would be blocked in the U.S. by September 15, Trump said, if it is not acquired by new owners. In a research note Monday, Cowen & Co. analyst John Blackledge noted that banning TikTok “would invite unnecessary electoral risk for Trump by angering 100 million TikTok users.”
There will be significant repercussions from a presumed Microsoft acquisition. It would return the tech giant to the advertising business after years of moving in the other direction. As a private company, ByteDance has not disclosed financials, but a recent Wall Street Journal report estimated its ad revenue at $1 billion this year, surging to $6 billion in 2021.
For rival social media companies, a Microsoft takeover would mean much deeper pockets and visibility for TikTok. The firm this year hired former Disney streaming chief Kevin Mayer as CEO as it sought to woo advertisers and enhance its reputation.
In a blog post, analyst Rich Greenfield at LightShed Partners wrote that many key details — including a proposed carving up of global territories Microsoft would acquire — remain in flux. But he said the “knee-jerk reaction is negative” on the part of investors in Facebook, Snapchat and Twitter as they contemplate the deal.
On cue, shares in Facebook, Twitter and Google parent Alphabet (whose YouTube division is a rival of TikTok) all declined fractionally Monday. But Greenfield sees the longer-term outlook as more rosy for rivals.
“The full shutdown of a growing competitor would have been a positive, both in terms of share of mobile time spent and advertising spend competition,” he wrote. “However, the reality is all three should probably be unaffected-to-positive, as the structural disruption will likely slow TikTok down in the short-term and less potential for global scale will hurt it competitively.”
Microsoft’s past efforts to ramp up consumer brands have met with uneven results, Greenfield pointed out, citing Skype, Mixer, Hololens, LinkedIn and Minecraft. The company “is not a ‘bad’ owner of TikTok,” Greenfield reasoned, “but we just do not see Microsoft as increasing TikTok’s threat to Snapchat, Facebook and Twitter that already existed under ByteDance.”
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