Snap (NASDAQ:SNAP) has made some significant inroads as a social media platform. However, those inroads haven’t come without some trouble, as the UK government is taking a closer look at Snap over its potential connections to underage users. That revelation has sent Snap down significantly in Tuesday afternoon’s trading session.
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Currently, the UK’s Information Commission is starting investigations on Snap, specifically Snapchat, over how well Snapchat is able to remove the accounts of underage users. Most social media apps already have policies in place that prevent their use by children under 13, in a bid to block the youngsters from gaining access to potentially harmful material. But a report from Ofcom—a media regulator—suggests that very few underage children have been removed from Snapchat so far.
In fact, the Ofcom reports noted that only 700 accounts held by “suspected underage” individuals were removed. Therefore, no one really knows how many actual underage users were removed from the platform, or how many remain. This is where the government investigation comes in, which—after it finishes its initial phases—may choose to upgrade to a request for internal data or even an official probe from there. With Snap’s earnings report of just a couple weeks ago showing slumping sales, increased government scrutiny isn’t something Snap needed to shore up its reputation with investors.
Meanwhile, analysts are on the fence as well. With four Buy ratings, 16 Hold, and one Sell, Snap stock is considered a Hold by analyst consensus. Further, with an average price target of $10.56, Snap stock offers a meager 1.93% upside potential.
