Since filing its $3 billion initial public offering on the New York Stock Exchange in February 2017, Snap Inc. has been facing a series of major setbacks. In May of last year, its shares dropped significantly after Snapchat saw disappointing user growth. The company also revealed late last year that it had lost $40 million due to poor sales of its Spectacles smartglasses.
On top of that, it seems the American camera company has now caught the attention of U.S. regulators as well. Snap confirmed that the U.S. Justice Department and Securities and Exchange Commission are investigating the company over its IPO last year, according to Reuters.
U.S. regulators have reportedly subpoenaed Snap for details on that IPO and other pieces of information presumably in relation to a lawsuit filed by disgruntled investors who have accused the company of deceiving the public about its competition with Instagram. In August 2017, it was reported that Instagram Stories, a clone of Snapchat's major feature, surpassed its closest rival in terms of daily usage, causing Snap's stock to plunge that time.
The complaint also alleged that Snap failed to disclose a lawsuit filed by a former employee prior to the IPO accusing it of falsifying some user metrics. However, the company described the lawsuit, filed in May 2017 in the U.S. District Court in Los Angeles, as baseless and maintained that its pre-IPO disclosures were accurate. For context, here's what Snap stated in its S-1 filing ahead of the IPO:
"Many of our current and potential competitors have significantly greater resources and broader global recognition and occupy better competitive positions in certain markets than we do. These factors may allow our competitors to respond to new or emerging technologies and changes in market requirements better than we can. Our competitors may also develop products, features, or services that are similar to ours or that achieve greater market acceptance. These products, features, and services may undertake more far-reaching and successful product development efforts or marketing campaigns, or may adopt more aggressive pricing policies."
With the latest regulatory probe on Snap's IPO, the company really has a lot to worry about in addition to its losing battle with Facebook's Stories feature.