What happened

Shares of Snap (NYSE:SNAP) have dropped today, down 6% as of 12:00 p.m. EDT, after Nomura Instinet analyst Anthony DiClemente released a bearish research note (via Tech Trader Daily).

So what

Citing data from Sensor Tower, DiClemente notes that iOS downloads for Snapchat have fallen by 40% through the first two months of the second quarter, while Facebook's Instagram downloads have grown over that time frame. That has obvious negative implications for user growth, but analysts are also skeptical about Snap's ability to reaccelerate monetization growth "in the near term." On top of that, there is a looming lock-up expiration on the horizon in August, when early employees and investors will be free to unload shares.

DiClemente is reiterating a "reduce" (equivalent to a sell) rating and $14 price target.

Woman wearing Snap Spectacles

Image source: Snap.

Now what

Prior to the IPO, Snap had attempted to secure agreements from investors holding roughly 50 million shares to agree to separate lock-up agreements, requiring them to hold shares for one year. Snap was unable to get any commitments, per the prospectus (emphasis added):

We expect approximately 50 million shares of our Class A common stock purchased by investors in this offering will be subject to a separate lock-up agreement with us providing for a restricted period of one year following the date of this prospectus. These agreements will reduce the number of our shares available for sale in the public market during their term. We may, in our sole discretion, waive any of these lock-up agreements before the restricted period expires. There are currently no binding commitments for investors to purchase these shares or enter into these agreements and the actual number of shares purchased by these investors in the offering or subject to these lock-up agreements may be more or less. After the lock-up agreements expire, all 1,157,213,232 shares outstanding as of December 31, 2016 (assuming the closing of the offering) will be eligible for sale in the public market, of which 625,316,324 shares are held by directors, executive officers, and other affiliates and will be subject to volume limitations under Rule 144 of the Securities Act of 1933, as amended, or the Securities Act, and various vesting agreements.

There is no reference to those 50 million shares that Snap previously expected to be bound by a separate lock-up, further suggesting that the company indeed was unsuccessful in securing commitments. The IPO lock-up expires on July 29, 2017.