Snap shares rise 44 percent on first trading day

The market euphoria was over a money-losing message service, Snapchat.

Now the eagerly awaited initial public offering (IPO) is set to see the Snap Inc 200million shares priced at up to £13 ($16) each on the New York Stock Exchange after markets close.

Facebook’s IPO in 2012 at $38 per share valued the company at $104 billion (it’s now worth almost $400 billion).

It can take some time for investors in stocks trading on their first day to find a price, particularly in a case such as Snap in which there is high investor interest. The Initial Public Offering (IPO) will be priced after the USA stock market closes on March 1 and will see the company, which has yet to make a profit, be valued in the region of $20-25 billion (£16-20bn).

Snapchat parent company Snap Inc. issued shares to the public for the first time on Thursday, and investors reacted enthusiastically, sending shares up 44% in the first day. The company reported a 3.1% lift in organic sales in 2016, but its growth forecast of 2% for this year is below analysts’ expectations.

Snap argues its value is in the length of time its users spend on the app, as well as the revenue opportunities that will arise through the growing trend of young people using video to interact with each other instead of text.

Despite Snap setting its sights on the biggest player in its sector, analysts claim another social platform may be a better comparison, although it’s probably not a welcome one.

With that, it looks like Wall Street had plenty of an appetite for Snap despite multiple major concerns about the company’s business. Facebook, meanwhile, was treated to a rough first day when it went public but flourished as it went forward. “The typical IPO tech investor will say that’s fine and it doesn’t matter”, he said.

Blame Facebook. Growth slowed to a crawl since Facebook’s Instagram cloned Snapchat’s “stories” in August.

Snap, Gellert said, is in a weaker position at this point in its development than Facebook, which has had considerable post-IPO success.

The company’s long-awaited public introduction, planned for four months and led by Goldman Sachs and Morgan Stanley, fueled all types of speculation regarding how the stock might perform.