By all accounts, Snapchat parent company Snap Inc.’s initial public offering was a success.
The company’s stock price opened at $24 a share, and it was valued at $33 billion—not bad for an app that launched in 2011 and heavily depends on users’ selfies and in-the-moment videos. It closed at $24.48—a 44 percent increase from the $17 initial share price.
Of that $33 billion, Snap CEO Evan Spiegel’s cut is reported to be around $6 billion, making the 26-year-old one of the tech world’s wealthiest executives (on paper, anyway).
Spiegel and co-founder Bobby Murphy rang the bell Thursday at the New York Stock Exchange. In the following hours, they saw share prices of Snap soar, and Snap had the highest volume of trades among any company Thursday, as 216 million shares changed hands.
Snapchat’s success has been largely attributed to widespread use among millennials, who spend a reported 30 minutes per day consuming user and publisher content on the service—not to mention creating their own snaps and stories.
The platform has also seen growth in recent months among older demographics, and the company reported that sales from advertisers are expected to top $1 billion this year.
Though investors were keen to snatch up shares of the platform-turned-camera company, not everyone is positive about Snap’s future.
Snapchat still isn’t profitable—and Snap will continue to face stiff competition from platforms such as Facebook and Instagram.
Snapchat went public at what was an interesting point in the company’s history. Unlike many companies, like Uber and Airbnb with sky-high valuations, Snapchat decided to go public earlier in its monetization, probably because it’s better to go public before the market considers the company overvalued.
Yet Snapchat is entering the markets at a time when growth has slowed, possibly due to Instagram copying its “stories” feature. And while revenue is quickly growing, they are also significantly unprofitable.
Investors also must put significant trust in Snap’s founders.
The Financial Time’s Nicole Brooke Masters called the company’s governance system “straight out of a banana republic”:
Unlike today’s British IPO investors, would-be Snap shareholders received a full prospectus well ahead of the float that clearly laid out the company’s potential problems in a 32-page list of “risk factors”. Not only does it bizarrely consider itself a “camera company” rather than an app developer, it faces slowing user growth and rivals copying its products.
So if Snap turns out to be more like Twitter (down 60 per cent from its float) than Facebook (up 250 per cent), investors cannot say they were not warned.
Unhappy investors will still have to answer to Spiegel and Murphy, who will retain control of the company even if they resign as chief executive and chief information officer, respectively.
To that point, The Guardian reported:
Snap’s initial public offering marks a turning point in US capitalism: it is the first time that the only shares on offer are those with no voting rights.
What do you think of the company’s IPO? Do you think Snapchat can flourish as a worthy social media competitor to giants such as Facebook, or will it struggle as Twitter has done?