Snap Shares Soar on News of TikTok Ban Bill in Congress
Mar 7, 2023
Shares of Snap Inc. rocketed higher during Wall Street trading on Monday, finishing the day up 9.48%, after U.S. lawmakers signaled that they were closer to introducing a bill that would ban the popular TikTok app, owned by China’s ByteDance Ltd.
Democratic Senator Mike Warner, Chairman of the Senate Intelligence Committee, said he intends to introduce such a bill this week with Republican Senator John Thune. This comes after months of growing negative sentiment against the app, which comes mainly from national security concerns.
TikTok’s opponents claim that it compromises U.S. security interests and can be used as a mass spyware program by China’s government. The White House has reportedly been in talks with Congress over the matter, and sources have reported that the Biden Administration has approved a draft of the legislation. Given the bipartisan support to ban the Chinese app, the bill likely has a solid chance of landing on President Biden’s desk, although the specific timeline remains unclear.
It isn’t just Snap that gains to benefit from TikTok’s removal from U.S. markets, but also Meta, Facebook’s parent company, Alphabet, Google and YouTube’s owner, and Pinterest. These companies have performed poorly over the last year as digital ad spending revenue slipped as economic concerns amid rate hikes forced companies to pull back on spending.
Meta ended the day slightly lower after giving up gains into the closing bell, while Google and Pinterest closed 1.66% and 1.06% higher, respectively. Snap’s outperformance may owe to the fact that it has severely underperformed against its peers. While a TikTok ban would bode well for those companies, it may depend on how fast companies can capitalize on capturing new creators that migrate from TikTok.
Snap shares closed above the closely watched 200-day Simple Moving Average (SMA) on Monday, a bullish signal for technical traders. Meanwhile, the stock is trading with a very low implied volatility rank (IVR) of 4.6. That said, taking a long call position to benefit from a possible uptrend following the technical signal offers a potential strategy for those believing Snap will perform better in a world where TikTok is banned from the United States.
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