Shares of social media company Snap Inc. fell dramatically in what is poised to be the worst day ever for the company. Snap shares plunged as much as 40% on Tuesday morning, and the company announced that it would slow hiring, according to media reports.
On Monday, Snap CEO and Founder Evan Spiegel had warned investors that the company wouldn’t meet its targets for revenue and earnings in the current quarter, which triggered a rush of sell-offs of its stock. Other social media companies also suffered a similar blow as Snap’s warning caused their shares to take a hit as well. Shares of Facebook and Instagram’s parent company Meta Platforms Inc. were down more than 7% in the premarket, while Twitter Inc. stock fell almost 4%, according to Market Watch. Stocks of social media companies were on course to drop more than $100 billion in market value in light of Snap’s statement.
Spiegel blamed the economy for the company’s losses. “Like many companies, we continue to face rising inflation and interest rates, supply chain shortages and labor disruptions, platform policy changes, the impact of the war in Ukraine, and more,” Spiegel wrote in a memo sent out to employees that was obtained by The Verge.
As a result, the company also plans to slow down its hiring for the remainder of the year. Snap is planning on hiring 500 more people this year, as opposed to the 2,000 new people it hired over the past 12 months, according to The Verge. “We will also evaluate the remainder of our 2022 budgets and leaders have been asked to review spending to find additional cost savings,” the company memo read. Similarly, Meta also implemented a hiring freeze this year as its stock prices continue to dip.
It seems that while social media companies may have benefited from a surge in users during the covid-19 lockdown in 2020, they are now struggling to gather ad revenue in a frail economy.