Blue Duck Capital Partners, a long-short equity fund based in Manhattan Beach, California, sent a Tuesday letter from CIO Alex Beinfield to CEO Evan Spiegel, CTO Bobby Murphy, and the board pressing Snap to raise capital by selling part of its Specs business. Snap carved Specs into a standalone subsidiary in January.
Beinfield argues that selling 20% of the unit at a $5 billion valuation would generate $1 billion, enough to fund the division's needs for roughly two years. He says bringing in outside investors would support Specs' spending without adding to Snap's share count and would protect the company's cash flow.
Beinfield called the technology unveiled last month "remarkable" with major upside, while cautioning that widespread adoption is unlikely in the next year or two. He suggested that outside funding could potentially let Snap reduce Specs' current price of around $2,200.
The letter recommends tapping venture capital or a strategic investor such as SpaceX. It also warns that not acting now would likely mean "a deeply depressed share value, which limits strategic optionality, hurts employee morale and retention, and lowers the chances of reaching ambitious objectives for what Specs can be."
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Around 10:02 a.m. Tuesday in New York, Snap shares were higher by roughly 1%, putting the company's market value near $9.5 billion. Blue Duck says it owns Snap shares but did not disclose the size of its position. A representative for Snap did not immediately comment, and Beinfield declined to comment.
Irenic Capital Management has also built a stake and has urged Snap either to separate Specs into an independent entity or to close it, contending that Snap has spent more than $3.5 billion on the effort and arguing the unit should be able to fund itself by now.
Snap, co-founded by Evan Spiegel, Bobby Murphy, and Reggie Brown, is best known for Snapchat's disappearing messages and photos. The company listed its shares in 2017 using a multi-class structure that strips public investors of voting power while leaving control with the co-founders. Specs, launched by Spiegel last month with a promise of "new ways to learn, create, work, and play," are expected to ship this fall.
This is a funding fork in the road: keep pouring company cash into Specs, or invite outside capital to carry the load. The choice affects dilution, cash flow, and how fast Snap can iterate on the hardware.
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