Snap Inc Sheds Post-IPO Gains, Closes At Lowest Level So Far

In the company’s initial public offering Friday, it popped 44 percent from an offering price of $17 a share, which brought its price for public investors to $24. It has been estimated that up to a United States $1 billion of Snap stock may have been shorted right from the start of the IPO. The hotly anticipated IPO was the largest USA tech IPO since Facebook in 2012. Many highly valued companies such as Airbnb and Uber have yet to hint on plans to officially mark their stock market debut. Twitter, meanwhile, has struggled to combat abuse on its network, while Facebook’s scant regard for privacy has helped drive teens in drove to Snapchat. Snapchat is a successful company, but it remains to be seen whether or not that success can be sustained in the long-run. Six months after their first day of trading, Facebook was down 38.4%, and Alibaba was off 12.8%.

“With Snap’s $3.4 billion initial public offering, they have simply given up giving a damn”, Rob Cox wrote. You can make a case for Facebook’s valuation given its digital marketing market share, profitability, and remarkable growth.

The IPO was considered a success, however, raising $3.4 billion for Snap.

“It’s a strong company, but went very far on voting rights”, said Max Wolff, market strategist at 55 Capital.

Twitter, meanwhile, has had a totally different story.

Stock market analysts have questioned why Snap went public at 6 years old with nascent revenue-generation and increasing losses. Twitter stock is now trading at $15.23 per share. But there are fears that Snap’s appeal will be as short-lived as the bunny ears and rainbow vomit superimposed on the images its users share. That’s the “flippers” – investors who buy at the offer price and sell at the market price immediately after.

Still, the stock’s early performance may not be an adequate measure for how it will do in the long run.

“They must be a different company a year from now”, added Kagan. In a note to his clients, Pivotal Research Group’s Brian Wieser called Snap “significantly overvalued given the likely scale of its long-term opportunity and the risks associated with executing against that opportunity”.

“The company needs a well-thought-out acquisition strategy”, she said. Snapchat operates in a relatively niche fast-paced market and competition is fierce.

Ads are Snapchat’s largest source of income, and the company’s revenue is expected to top $1 billion this year.

The company also gained some negative attention after it announced it would issue only nonvoting shares.

And Snap’s two young founders will maintain voting control over the company, meaning those buying its stock now will have no say in how the company operates.