Snap faces probe from DoJ and SEC over IPO disclosures

US government agencies have launched an investigation into complaints that Snap attempted to cover up the potential threat to growth prospects of its Snapchat platform ahead of its initial public offering last year.

Snap revealed on Tuesday evening that it had received subpoenas from both the Department of Justice and the Securities and Exchange Commission and stated that it was ready to cooperate with inquiries.

The tech giant said regulators were "likely focused on IPO disclosures relating to competition from Instagram," presenting another hurdle for co-founder and chief executive Evan Spiegel who was already battling with declining daily users, a heavy turnover within the firm's executive ranks and falling share prices.

Shortly after Snap's IPO last year, investors filed a class action lawsuit against the firm, accusing it of making "materially false and misleading statements".

The suit alleges Snap had intentionally made inadequate disclosures in its prospectus regarding just how much rival Instagram was already slowing Snapchat’s growth before it went public.

Snap claimed the suit was “meritless”. However, a Los Angeles judge gave the case the green light to head to court.

"It is our understanding that these regulators are investigating issues related to the previously disclosed allegations asserted in the class action about our IPO disclosures,” Snap said.

“While we do not have complete visibility into these investigations, our understanding is that the DOJ is likely focused on IPO disclosures relating to competition from Instagram.”

As of 1100 GMT, Snap shares had lost 3.73% in pre-market trading to $6.46 each.