Snapchat soars on market debut
The two men who founded Snap, the parent company of the ephemeral messaging service Snapchat, out of their Stanford University dorm rooms are now billionaires before the age of 30.
The sharemarket launch of Snap outstripped expectations for its stock market debut when it closed worth about US$28 billion (NZ$40 billion).
Snap co-founder Evan Spiegel, who earned US$272 million on the offering, showed up to the floor of the exchange in a suit and tie to ring the opening bell before leaving the building to watch festivities away from the spotlight he famously eschews.
Spiegel and fellow co-founder Bobby Murphy reportedly made US$5B each in Snapchat’s IPO.
The IPO has tested investor appetite for a social media app that is popular among people under 30 for applying bunny faces and vomiting rainbows onto selfies, but has yet to convert ‘‘cool’’ into cash.
Snapchat, Snap’s main service, has a loyal user base of 158 million people who use it to send 2.5 billion messages every day, according to its initial public offering filing.
Absent from the day’s festivities was Snapchat’s third founder, Reggie Brown.
Brown famously cut ties with the company in the biggest start up founder lawsuit since the Winkelvoss twins settled with Facebook founder Mark Zuckerberg for a US$300M deal.
Brown eventually settled for US$158M for his stake in the company, much less than the US$500 million he originally asked for.
Snap’s offering was well timed, with investors clamouring for fresh opportunities after 2016 marked the slowest year for tech IPOS since 2008.
The broader market has also been buoyed in the months following the election of US President Donald Trump, with the benchmark S&P 500 surging 10 per cent since the November 8 election
"The environment is terrific. Animal spirits are running through the streets here." Stephen Massocca, senior vicepresident at Wedbush Securities
amid optimism around the Republican Administration’s domestic proposals, including plans to reform taxes paid by businesses.
‘‘The environment is terrific. Animal spirits are running through the streets here. What better time to price,’’ said Stephen Massocca, senior vicepresident at Wedbush Securities.
The launch could encourage debuts by other so-called unicorns, tech startups with private valuations of US$1B or more.
Investors bought the shares despite them offering no voting power, an unprecedented feature for an IPO at odds with rising concerns about corporate governance from fund managers looking to gain influence over executives.
Despite a nearly seven-fold increase in revenue, Los Angelesbased Snap’s net loss widened 38 per cent last year. It faces intense competition from larger rivals such as Facebook’s Instagram as it grapples with decelerating user growth.
- Reuters with Washington Post