What Happened?
Shares of social network Snapchat (NYSE: SNAP) jumped 4.5% in the afternoon session after the company settled a key lawsuit that accused it of addicting young people to social media.
The settlement allowed Snap to avoid a U.S. civil trial that was considered a “bellwether” case, meaning its outcome could have set the tone for a wave of similar litigation. The lawsuit also involved other major tech companies, including Meta, TikTok, and YouTube, which had not settled. While the details of the deal were not disclosed, Snap and the Social Media Victims Law Centre confirmed they resolved the matter amicably. The stock’s positive reaction suggested investors viewed the settlement as a favorable outcome, removing the uncertainty and potential negative publicity of a public trial.
After the initial pop the shares cooled down to $7.67, up 4% from previous close.
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What Is The Market Telling Us
Snap’s shares are very volatile and have had 22 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 2 days ago when the stock dropped 1.8% on the news that the U.S. announced potential tariffs on several European countries.
The sell-off was a reaction to news that the White House planned to impose a 10% tariff on imports from eight European nations, including France, Germany, and the United Kingdom, starting February 1. Reports indicated the tariffs were intended to pressure Denmark over the potential sale of Greenland to the U.S. and could rise to 25% if a deal was not reached. The announcement caused a significant downturn in U.S. stocks, with the S&P 500 and Dow Jones falling more than 1.4% as investors returned from a holiday weekend and reacted to the heightened trade uncertainty. The downturn was further exacerbated by a spike in Treasury yields. Higher rates particularly hurt growth stocks such as tech names since investors must discount financials further out in the future back to the present.
Snap is down 5.7% since the beginning of the year, and at $7.67 per share, it is trading 34.1% below its 52-week high of $11.63 from January 2025. Investors who bought $1,000 worth of Snap’s shares 5 years ago would now be looking at an investment worth $143.10.
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