What happened
Shares of Snap (SNAP 2.24%) were rallying on news that Texas would ban its state agencies from using TikTok, the popular short-form video app considered a close rival to Snapchat.
Snap finished the day higher, gaining 9.7% on the news.
So what
In the latest sign that incremental pressure was building against TikTok, which is based in China, Texas Governor Greg Abbott announced a "statewide model security plan" to address vulnerabilities to TikTok and other software.
In a statement, Abbott said, "The security risks associated with the use of TikTok on devices used to conduct the important business of our state must not be underestimated or ignored," and charged that TikTok harvests potentially sensitive user data.
The announcement called out other prohibited technologies, but TikTok was the only one referenced by name. State agencies will have until Feb. 15 to implement their own policy to enforce the statewide plan.
Now what
Snap is arguably TikTok's closest competitor in the U.S. and elsewhere, as both apps offer short-form video and are seen as a form of entertainment as much as they are for social media. Both are also popular with Gen Z and other young adults.
Snap has seen its growth slow substantially since in recent quarter, which the company has blamed on macroeconomic factors or other social media companies are suffering a similar slowdown. Still, competition from TikTok is likely a factor as well.
Some analysts also see a possibility that the app could be banned entirely from the U.S. While that doesn't seem likely at the moment, Snap stock should continue to benefit from more restrictions against TikTok, should they come.
