Snap Inc, the owner of messaging app Snapchat, has gone public after months of speculation, with shares initially priced at $17, with stocks jumping 44% to US$24.48 on the first day of trading. It brings the value of the business to $28bn, making it the biggest technology IPO since Alibaba made its debut in 2014 […]
Snap Inc, the owner of messaging app Snapchat, has gone public after months of speculation, with shares initially priced at $17, with stocks jumping 44% to US$24.48 on the first day of trading.
It brings the value of the business to $28bn, making it the biggest technology IPO since Alibaba made its debut in 2014 and reflects huge demand, considering the initial offering of shares was expected to be between US$14-16.
Loss-making Snap’s Snapchat app – best known for disappearing messages and use of image filters to add special effects – has proved popular with teenagers especially.
It has more than 158 million users worldwide but user growth has been slowing.
It reported a rise of just over 3% in the final quarter of last year when it had been in double figures earlier in 2017.
That has been partly put down to stiff competition from Facebook’s Instagram.
The sale of 200 million shares demonstrated a frenzy of demand for the stock and it took almost two hours from the opening bell being rung for the opening price to emerge.
The main question for investors ahead of the Initial Public Offering(IPO) was whether Snap represented a good financial bet given varied performances for similar stocks since their own market debuts.
The fact that the shares were offered at the top end of the range, at $17, was a good indicator of strong interest.
NBCUniversal, a unit of Comcast and parent of CNBC, invested $500 million in Snap during its IPO as part of a strategic investment and partnership, according to sources.
The stock allocation by Snap to NBCUniversal appears to be the only one made to a new strategic investor, which would make NBCUniversal the only U.S. media company with a stake. Other companies could buy shares in the open market.
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.
The shares proved popular despite the IPO being unusual in that investors got no voting power, with co-founders Evan Spiegel and Bobby Murphy continuing to maintain tight control.
They each landed a 17% stake worth $4bn (£3.26bn) based on the offer price in the share sale.
A test of new players vs. Facebook and Google
Robert Lang, CEO at Socialbakers, commented on the IPO: “The market seems to be bullish on Snap shares. That suggests investors are betting Snap’s innovative streak will outweigh the growing competition it faces from Facebook, which has moved aggressively into Snapchat products like stories right across its business, from Facebook to Instagram to WhatsApp. Snap has been an early leader in augmented reality with the Snap glasses, and there are even reports that they want to build a selfie-drone. That kind of innovation can keep the user base growing, and increase the stickiness of existing users. The big question for 2017 will be if they can translate that innovation into a growing ad-sales business, or if sales decelerate from their big jump in 2016.
“In many ways, Snap is a test to see if new ad-supported networks can emerge and grow when they are competing for dollars with Facebook and Google, which account for more than 80% of the market. Ad dollars continue to shift from TV to online media, but the incumbents have massive advantages in terms of competing for this new money, thanks to their huge user bases. If Snap succeeds as a public company, it’ll be a signal that new “walled gardens’ can emerge and thrive.”
