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Tim Stone had a 20-year career at Amazon -- not a place known for its cushy corporate culture. Then he joined Snapchat operator Snap (NYSE:SNAP) as its chief financial officer.
In this segment from MarketFoolery, host Mac Greer and senior analysts Emily Flippen and Jason Moser discuss the management troubles at Snap, its possible future, and just what it means that after less than a year, Stone is heading out the door, despite the fact that it will cost him a boatload in deferred compensation.
A full transcript follows the video.
This video was recorded on Jan. 16, 2019.
Mac Greer: Let's move on to Snap, the Snap soap opera. Shares of Snap down almost 10% at the time of our taping. On Tuesday, the technology company said that CFO Tim Stone is leaving the company after just eight months on the job. Here are a few stats. Stone moved to Snap in May after working at Amazon for 20 years. In addition to his salary, he had $20 million in restricted stock with an option to buy 500,000 common shares. Stone will not get the majority of that stock, as it was scheduled to vest over four years. So, he's leaving with all this stock on the table. What's going on here?
Emily Flippen: That's a really good question. I think it's interesting to see someone coming from Amazon who has such a quick turnover at Snap. It begs the question of, Amazon doesn't have the best reputation for company culture, so how bad are things at Snap that he couldn't even last a year? I don't have much insight into the Snap culture, unfortunately, but I don't think it bodes well for the company.
Jason Moser: No. We've read a lot into the culture at Snap. Again, you're reading that, but those are the only accounts we can go by. And they don't seem all that clear. I like to have a lot of fun with this company because I really don't like it.
Greer: What is Snap? What is this company?
Moser: They're a self-proclaimed camera company. I would argue that today, it seems they're more in the business of revolving doors, based on everybody who's leaving. Listen, I'm working a little bit on my roasting skills here.
Greer: I like it!
Moser: I came up with these on the ride to work today. If you scrounge through the change in your couch, you're likely to come up with enough money to buy a share of Snap before a cup of coffee at Starbucks. Hey-o! I'm not saying things are dire, but we may need to start referring to the company as Snapped.
Moser: Shareholders' best chance for a double from today's price is a reverse split. I'm out. George Costanza, leave it on -- no, no. Listen, we give these guys a hard time, but really, we should, because this is a company that probably should have never come public. I blame the underwriters for that. It's hard to blame Evan Spiegel because they gave him a lot of money to do this.
Greer: I have a feeling you're going to blame Evan Spiegel.
Moser: Greed is just greed. The bottom line is investors deserve at least a competent leader, and he's not one. Listen, we hold other CEOs to the same account. Kevin Plank is one that I've kept on the hot seat all of 2018.
Greer: At Under Armour.
Moser: Put him on the hot seat in 2019 because we saw the same problem there at Under Armour. Executives would come in there, work, and then they'd leave. A pattern starts emerging, and you realize that he's not the easiest guy to work with. Thankfully with Under Armour, their COO and CFO have stayed on. That's the standard we've held. That's one of those red flags we've been watching. With Spiegel and Snap, unfortunately, executives keep on leaving. This is not the first person to leave. They have a big problem here.
The other problem, a really damning chart I ran across on Twitter the other day from Rob Price over at Business Insider, I think this says a lot, there's a Cowen survey that was done in December 2018. The question was posed to ad partners if, given the choice, which would your largest client prefer to advertise on? Choice was between Instagram Stories and Snapchat Stories. One hundred percent answered Instagram Stories to 0% Snapchat Stories.
That's a huge problem, and it doesn't seem like they've come up with any way to answer it yet.
Greer: Yeah, those numbers don't seem good.
Greer: When we look out into the future, five years from now, and we're looking at Snap, has Snap faded away? Slowly or quickly? Has it been acquired? Or has it come up with some sort of second act? We're talking about the great rebound, the great recovery of Snap.
Flippen: There's 100% a second act here. No, no, I'm joking. [laughs]
Moser: [laughs] Wow! I was getting ready --
Flippen: It's a slow decline, I don't think it's going to be a fast decline. I think they're going to hold on for as long as possible. I really don't think anyone's making an acquisition here because they still haven't figured out a way to effectively monetize. Jason's stat perfectly encompasses it -- what are you getting when you're buying Snapchat? Not much! I think they're probably going to struggle along for a little while. It's going to be that sad, slow decline.
Moser: Yeah. I want to be glass-half-full and say there's something there. I tend to agree with Emily here, though. I don't know what it is. Maybe at a fraction of what the market's paying for it today, there's something that somebody out there might like. But clearly, the platform is bleeding users. I admittedly never used Snapchat, but it sounds like a lot of people don't use Snapchat, and that's a big problem. I think the only chance they really have is what we've seen other companies in the space like Twitter and Facebook do over time, acquire other apps, bring them into their family. They're not really doing that. Part of that is probably them recognizing themselves as a camera company. Most people say camera, they think hardware. We don't like investing in that stuff. So, yeah, I tend to agree with Emily.