"It's tracking to look more like Twitter than Facebook simply from the perspective of the top-line growth doesn't support a long-term-oriented growth model," he said, citing slowing user growth toward the of 2016, which Snap revealed in its S-1 filing earlier this month.
Businesses like Facebook or Twitter's grow in value because of engagement and total usage.
"If you cut total usage off at the knees, then you can only grow in value by engagement, and then you only grow thereby by advertising and monetizing that user base even more than they otherwise would be," he said.
Facebook's business has shown the constraints on how much monetization is possible per user, he said. The company warned investors last fall that it was running out of places to put ads in users' news feeds, and that its "ad load" would probably drop in 2017.
Palihapitiya also criticized Snap's "extreme" voting rights structure, which goes well beyond typical dual-class structures used by tech companies like Google, where common stock holders have less power than early investors and founders. In Snap's case, common shareholders will get no votes.
"It's one thing to give common investors a vote and then have 500 for a different class, but it's another to give them none entirely," he said.
When you combine all those things together, he said, "it's a non-obvious story of why one would buy this at an extremely high valuation until the engagement or growth story is dramatically more clear."
— With reporting from CNBC's Josh Lipton.