The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Sebastian Pellejero

NEW YORK, April 16 (Reuters Breakingviews) - Evan Spiegel built Snapchat on impermanence. The founder acts like loud shareholder complaints will also fade away if largely ignored. That might be right, given Spiegel's near-total control, but his decisions carry a high cost.

Irenic Capital, which holds 2.5% of Snap’s SNAP.N non-voting shares, stressed the potential for improvement last month, pointing to recent artificial-intelligence-driven gains at Meta Platforms META.O and AppLovin as the standard Snap should chase. The activist’s demands were sweeping, including cutting 21% of staff, divesting smart glasses unit Specs, and granting voting rights to shareholders. Generous equity-based compensation to employees could also be trimmed. The prize, it argued, would be a stock worth six-to-seven times more.

Of those demands, Snap has moved on one. Cutting 1,000 employees is expected to reduce annualized expenses by more than $500 million, enough to cover last year’s $460 million net loss for the first profit in its history. The cost cuts also quietly draw a clearer line between Snap and its glasses unit, potentially laying the groundwork for a spinoff after a rumored attempt to raise $1 billion for Specs last fall. Shares are up 8% since announcing cuts.

Snap, however, is still down more than 77% since going public and 90% from its peak in 2021. The stock trades at 1.5 times next year’s expected sales, according to Visible Alpha, a quarter of the multiple Meta commands.

Larger questions remain. After a decade of development and $3.5 billion invested, Specs is expected to launch later this year. A multi-year chip deal with Qualcomm QCOM.O signed last week signals no intention of retreating from a market that has humbled bigger companies.

The company's AI strategy has floundered. A $400 million deal announced in December to integrate startup Perplexity's search was stripped from the company's first-quarter guidance in February, noting the two companies had yet to agree on a broader rollout.

There's also a fundamental problem. Snapchat’s global users generate about $3.60 each on average, about a fifth of what Meta earns, owing to lagging ad-targeting technology and a younger demographic. Spiegel, who, along with his co-founder, controls 99% of Snap's voting power, has ignored outside advice for years. For shareholders along for the ride, the fare keeps rising.

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CONTEXT NEWS

Snap, the parent company of the messaging platform Snapchat, announced plans to slash up to 16% of its global workforce on April 15.