After disappointing markets with its third-quarter earnings report, Snapchat parent company Snap Inc's earnings details also show that Chinese tech firm Tencent has purchased around 10% of the company’s non-voting shares.
Snap Inc. shares closed the US Tuesday trading session a little higher. However, since releasing its third-quarter results post close, overnight trading was brutal and the Snap share price was down over 10% during pre-market trading.
As the US market open moved closer, the share price recovered somewhat to show a 2% loss as investors digested the Tencent news.
The results also showed its user growth figures were lower than anticipated, while the company’s quarterly losses more than trebled.
The purchase by Tencent of Snap Inc’s shares, equates to around 10% of the US photo app company. The detail was disclosed in the financial details of the report.
While analysts and investors were downbeat on the Snap stock in the aftermath of the earnings release, this development could give the firm the vote of confidence it needs.
The Snapchat share price has lost ground so far this year, as developments by Facebook have likely contributed to the slowdown in new user growth of the camera app.
However, with the addition of significant interest and investment from a key Chinese player, the potential for growth outside the app’s traditional markets has improved.
During the earnings call Tuesday, Snap Inc’s CEO Evan Spiegel said that while the pace of user growth was disappointing in the third quarter, the company had been working on specific goals he’d outlined earlier in the year.
And, in order to further facilitate faster user growth going forward, the Snapchat app is to undergo a redesign for Android users.
“We need to accelerate the adoption of our product among Android users, users above the age of 34, and users in the Rest of the World markets,” Spiegel said on the call.
“We are currently redesigning our application to make it easier to use. There is a strong likelihood that the redesign of our application will be disruptive to our business in the short term,” he said, adding: “We're willing to take that risk for what we believe are substantial long-term benefits to our business.”