Snap shares soar in trading debut

A banner for Snap Inc. hangs from the front of the New York Stock Exchange, Thursday, March 2, 2017, in New York. Snap’s market value is more than double the size of rival Twitter.

Now, it is trading more than three times its IPO price, near a record high. Twitter, which debuted with shares priced at $26, had a similar first day to Snapchat. That would add $392 million to each of their net worths, based on Snap’s closing price, potentially boosting it to almost $5.6 billion. The main reason for the IPO is to crate a market for its stock.

Snapchat’s parent company Snap is working on a new hardware product, which happens to be a drone.

“It’s well accepted that investors are overpaying for Snap based on expected sales and earnings, but it doesn’t seem to matter”, said Jasper Lawler, senior market analyst at London Capital Group, in a note. Co-founders Evan Spiegel and Bobby Murphy will each be selling 16 million shares in the IPO, earning them $272 million apiece. For one of the biggest social media networks in the world, with nearly 160 million daily users, Snapchat draws a staggeringly low amount of revenue – the company, which began operations in 2011, never once turned a profit.

But an investment in Snap comes with significant risks.

Nicole Bullock, the U.S. equities correspondent for the Financial Times, people were excited about the float because there had been a drought of big tech companies listing for the last few years. In addition to Instagram’s massively popular Stories feature, WhatsApp, another Facebook-owned company, launched its own version of Stories last month.

But what makes Snap even more unusual is none of the openly traded shares get any vote at all. The company needs to quickly leverage all the money it is generating and out it to good use.

Snap made its IPO plans official in late 2016 but initial details were scarce as companies with less than $1 billion in annual revenue can submit its IPO plans confidentially with the Securities and Exchange Commission.