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COL.03.15.17.Lyons
Illustration by Sam Island for Fortune

Snap Is Clown Car 2.0

Mar 10, 2017

Imagine someone trying to sell you a hot new Internet stock with the following pitch: (1) The company’s losses are greater than its revenues. (2) Its customer growth is slowing. (3) Though it may tell you otherwise, it competes head-to-head-to-head with Google (googl) and Facebook. (4) Its shares carry no voting rights—which means the 26-year-old CEO, who is working in his first job, can never be dislodged. And (5) it’s expensive as all get-out.

I write this hoping that you, dear reader, are not among the hordes of optimistic IPO chasers who bought shares of Snap (snap), parent of messaging app Snapchat, on its debut in early March. Because the 1-2-3-4-5 pitch above is a sucker punch.

Snap’s bankers depicted the company as the next Facebook and presented Evan ­Spiegel—Snap’s boyishly photogenic cofounder and CEO—as a visionary wunderkind like Facebook founder Mark Zuckerberg. Hmm. Good story.

Here’s another good story: When Facebook (fb) went public, it was already gushing money, posting a net profit of $1 billion on sales of $3.7 billion in 2011, the year before its IPO. In 2016, Snap lost $515 million on sales of $404 million.

Indeed, if Snap had an analog in the pantheon of social media companies, it wouldn’t be Facebook, but rather Twitter—um, and that’s not a good thing. Twitter (twtr) was losing money when it went public in 2013, and it has kept right on doing so. Its stock has slumped to one-third its price on the first day of trading.

Snapchat, which has nearly 160 million daily active users, makes money selling ads—the same stash of digital gold that’s gobbled up in bulk now by Google and Facebook. “What Snap offers isn’t very unique or defendable,” says Jeff Rosenblum, cofounder of Questus, a digital-ad agency based in San Francisco. “I’d say they are going to be fighting very hard for the small piece of the pie that won’t be owned by Facebook and Google.”

That may be why Snap, in November, started selling sunglasses with a built-in camera for $129 and began calling itself a “camera company.”

So, you wonder, do cool, photo-grabbing shades make Snap worth a cool $31 billion? That was the valuation of the newbie public company two days after its March 1 offering.

“I wouldn’t touch it with a 100-foot pole,” Fred Hickey, editor of the investing newsletter High-Tech Strategist, told me. “It’s the kind of offering that can only happen after the second-longest bull market in history, when investors are delirious with their invincibility.” Or there’s this, from a Florida hedge fund manager, who sniffed: “I wouldn’t buy Snap stock with my dog’s lunch money.”

Facebook CEO Mark Zuckerberg once quipped that Twitter was “a clown car that fell into a gold mine.” Snap looks a lot like Twitter, only with more hype and hubris. Says Mark Spiegel, who runs Stanphyl Capital, a New York City hedge fund: Snap “will definitely be on my radar screen”—as a candidate for short-selling.

Correction, March 15, 2017: An earlier version of this article incorrectly identified the date of Twitter's IPO. We regret the error.

A version of this article appears in the March 15, 2017 issue of Fortune.

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