One month. That’s how long Snapchat has been on the stock market. Chief Executive Evan Spiegel and Chief Technology Officer Bobby Murphy rang the opening bell to a multitude of stock traders to cheers and applause at the New York Stock Exchange. This being the largest IPO for any Los Angeles company, it means the tech firm now sits firmly among the heavyweights in the technology market.
Hottest IPO this year? Hold your horses
The shares were priced at $17 each so as to raise $3.4B,and recorded a 44% rise to $24, closing the day at $24.48. The demand went up ten times beyond supply in spite of concerns whether the price will be sustainable owing to the presence of strong competitors such as Facebook. With the trends Snapchat set in terms of chatting and entertainment, much seems to be seen whether the performance will hold sway in the turbulent waters of the stocks market.
The euphoria will be short lived
With all the craze fed onto investors by media, it is understandable that people will scuffle to be part of the buzz and the trendier. Analysts, however, warned that the current stock price masks the risks that the company will face soon after, with the market at the moment not being in a position to offer the best judgement on the stock’s true value.
More financial scrutiny on the way
Regulations for companies listed at the Stock Exchange is usually stricter. This means that Snapchat’s books, investments, and returns will go through the lenses of regulators and will constantly be appraised. There are the quarterly reporting requirements to the Security and Exchange Commission which must be adhered to and the financial scrutiny will mean the company has to keep proving its worth as well as its ability to keep more users trickling in. User engagement and monetisation of users will need to go up for the company to sustain its growth and keep its edge.
2017 Predictions for SNAP Stock not looking good
The week ending on March 10 saw an 18% dip in SNAP share prices. This has raised questions of overvaluation and too much hype. In the case of Twitter, stagnation of user growth stalled revenue growth. What remains to be seen in the year is whether Snapchat’s advertising will bring in more users and accelerate growth. The other issue most analysts are keeping an eye on is the youthful executives and staff. With the millennial generation offering no guarantee for staying in the same spot for too long, it remains to be seen what effect this may have on the company.
With SNAP Stock, it’s all ‘Trader beware!’
Snapchat’s parent company lost $514M in 2016, which was a 38% increase in its 2015 loss. With its description under emerging growth companies according to US laws, it means that its gross revenue is below $1B so it may not need to reveal a lot of its financial data. The flipside is that it values itself much higher ($25B) and the shares it sold have no voting rights, a major concern for investors and analysts. Without a solid business model and a well cut out competition approach, SNAP stock doesn’t seem to offer any uniqueness since there are already stronger players in its market segment. With fierce competition from Facebook’s Instagram and outsourced computing power and storage functions, the company has more muscle flexing to do before its stocks’ real worth can be seen on the market.
The Metrics will reveal it all
Twitter’s stock soared more than 70% on its first day of the IPO but today has gone down 39%. This has been tied to stagnant user growth and key metrics that have not made investors happy. Facebook’s shares, however, have currently gone up to +259% from their IPO price. Snapchat is promising more based on the growing engagement of the younger people using video as opposed to text. Maybe Snapchat has already reached its peak users engagement, or maybe a trick down its sleeve will add more users and keep them engaged. This remains to be seen as the market adjusts to SNAP in the coming days.