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Snap sinks after revealing it was subpoenaed by the DOJ and SEC for information related to its IPO disclosures (SNAP)

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  • Snap told Reuters it had responded to subpoenas from US regulators on issues related to the company's IPO disclosures.
  • Investors have accused Snap of misleading the public about how competition from Facebook's Instagram service had affected the company's growth.
  • Snap has been struggling this year under sustained pressure from Facebook and Instagram. Its user base has flatlined since its Snapchat app's redesign.
  • Watch Snap trade live.

Snap slid 4% early Wednesday after a report indicated it had responded to subpoenas from the Department of Justice and the Securities and Exchange Commission in response to information contained in its March 2017 initial public offering.

The social-media company said it thought regulators were "investigating issues related to the previously disclosed allegations asserted in the class action about our IPO disclosures," according to a statement published Wednesday by Reuters. The company reportedly added that the DOJ was most likely focused on disclosures related to competition from Instagram.

The federal inquiries follow an ongoing shareholder lawsuit in which investors have accused Snap of misleading the public about how competition from Facebook's Instagram service had affected the company's growth, Reuters added.

According to Reuters, Snap said its pre-IPO disclosures were "accurate and complete" and called the lawsuit "meritless."

Snap's stock has gotten whacked this year, plunging more than 60% since February — after Kylie Jenner's infamous tweet blasting the Snapchat app's redesign. Selling has since wiped out $13 billion of market value.

Snapchat has lost popularity since the redesign, and sustained pressure from Facebook and Instagram has led to a huge problem for Snap: a declining user base. The company said in its second-quarter earnings release, on August 7, that it had suffered its first decline in sequential daily active users. That trend continued in its most recent quarter, when the company said that its number of daily active users fell by 1% and that it expected further declines in the fourth quarter.

Snap has fallen 48% this year, and is down 74% since going public in March 2017.

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