The stock market has been reaching record-breaking heights recently, with the Dow Jones Global Index closing at 21,000 for the first time in history a few weeks ago. Although the stock market is on the rise, it doesn’t necessarily mean that all stocks will follow suit. Snap, Inc. has been one of those stocks.
With much anticipation, the company Snap, known for their photo/video messaging app with the dancing white ghost, finally became public on the global stock exchange.
Snap’s Balancing Act
The entire tech community threw around speculations on whether the app was going to be a success similar to Facebook or a failure that resembled Twitter’s IPO.
Bullish supporters believed that the IPO was going to be a great success because of its mass popularity with the millennial generation. Critics, on the other hand, believed that there wasn’t enough evidence of revenue and were scared about the stability of the company.
While there were many differing views, CEO Evan Spiegel decided to set the opening share price at $17 per share, hoping to raise $3.4 billion.
Why Snap IPO is a Success
When the day finally came, all the hype behind the IPO shot the opening share price up to $24 per share. Although it has fallen over the past two weeks, it is settling down around $20 a share. The deal has become the biggest IPO since Alibaba Group went public in 2014.
A few years ago, Facebook offered to buy Snap for $3 billion. Snap declined and is currently at a $33 Billion valuation with its current share price.
Although there are many skeptics when it comes to the stock, supporters believe Snapchat’s avid follower base, along with the company’s innovativeness, can carry the price of the stock and see it prosper in the future to come.
Why Snap IPO is a Failure
Many of the bearish traders are on the edge of their seats, waiting to tell everybody “I told you so.” But with the current stock price, they aren’t right just yet.
It does not mean that the skeptics are wrong. There are a lot of circulating worries that the company is struggling to turn a profit. Another issue is that once the employee lock-up period 150 days after the IPO date, insider selling will begin to flare, creating more waves of downward movement.
The slow growth in turning digital ads into profitability, coupled with the lack optimism surrounding Wall street traders, could turn this tech IPO into a complete flop. In the meantime, it is not a failure, but it could very well be in the near future.
The Precedent for 2017 Tech IPOs
Snap’s IPO could mean that the drought is over when it comes to privately-held companies.
Going public has demonstrated a faster fundraising ability compared to private funding.
Airbnb recently raised $1 billion dollars, with a valuation of $31 billion, making it the second most valuable private company after Uber.
However, it is becoming harder to make a case to stay private when more and more benefits are being shown through Snap’s trial.
You should expect companies such as Uber, Airbnb, and Vice Media to shortly follow Snap’s leads–assuming the company remains successful.
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