Investment firm Irenic Capital Management announced Tuesday it has taken a substantial position in Snapchat’s parent company, claiming the social media platform could reach a valuation five times higher than its current worth through strategic changes.
In a letter to Snapchat co-founder and CEO Evan Spiegel, Irenic portfolio manager Adam Katz stated the company “should be worth a lot more than $7 billion.” Katz suggested that implementing Irenic’s recommended changes could boost the company’s value to approximately $35 billion.
The investment firm disclosed it now holds an economic stake of about 2.5% in the company’s Class A shares.
Irenic, known for successfully driving changes at technology and aerospace companies, is pushing Snapchat to either sell off or close down Specs, its augmented-reality glasses division. The firm also recommended workforce reductions to lower expenses and increased stock buybacks at current discounted prices.
“Snap should not continue doing what it has been doing. It’s not working,” Katz wrote in his letter. “And we’re not telling you anything you don’t know already.”
The market responded favorably to the news, with Snapchat’s shares climbing more than 12% during Tuesday’s trading session, which marked the final day of the quarter. However, the stock has still declined 45% since January.
While Katz praised management for creating a popular social media platform, he added “we think you have a second act,” emphasizing opportunities for improved artificial intelligence implementation.
Bloomberg first reported on Irenic’s investment position before the firm made its letter public.
Snapchat responded that it maintains dialogue with all investors and values their input. “We’ve 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,” stated Chairman Michael Lynton.
The company previously announced plans to repurchase up to $500 million in Class A shares and has formed a partnership with Perplexity AI to add conversational search capabilities to its platform.
