Value of Snapchat’s parent rockets to $34 billion in stock market debut
On Thursday morning, Snap’s 26-year-old chief executive, Evan Spiegel, and 28-year-old chief technology officer Bobby Murphy swapped their beachside V-neck T-shirts for button-downs, dark suits, and gold and blue ties.
Standing before a sea of stock traders, news cameras and big screens with Snapchat’s faceless ghost logo to mark the occasion, the pair rang the opening bell at the New York Stock Exchange, signaling the company’s public market debut.
Their Los Angeles company makes the photo and video messaging app Snapchat.
After pricing shares at $17 apiece to raise $3.4 billion, the company saw its stock leap 41 percent to $24 when it began trading under the ticker symbol SNAP. Shares hovered around $25 before closing at $24.48 on Thursday, valuing the company at more than $34 billion. Demand for shares has been 10 times the supply despite questions about Snap’s growth prospects.
Twitter went public in 2013, Facebook before it in 2012. Analysts believe that the enthusiasm for Snap has been heightened by both the dearth of major stock debuts in recent years, as well as what is seen as the last chance for investors to jump on board the social media bandwagon.
“There has been a lot of pent-up demand from investors to have a piece of the new pie,” said Pai-Ling Yin, an associate professor of entrepreneurship at USC. “Snap’s timing is great for that, but you have to keep that in mind when considering how to interpret the first-day valuation.”
Experiencing a “pop” — when a company’s stock jumps immediately after an IPO — is not unusual for technology companies, especially as they deal with the sudden rush in investor interest. But a day-one pop isn’t indicative of a stock’s long-term prospects. Twitter went public at $26 a share, experienced a 73 percent pop to $45.10, and today trades at only $15.72. Facebook, meanwhile, went public at $38 a share, surged nearly 18 percent during its first day of trading, then fell six months later at a low of $17.55. The company’s stock today trades at $136.
Which is to say, it’s far too soon to know how Snap’s stock will perform in the long run.
“During an IPO there’s a sense of euphoria, and people like to think they’re part of the latest and greatest thing, but current pricing does not reflect the risks and challenges the company will have to deal with later on,” said Clement Thibault, a senior analyst at Investing.com. “It’ll take a little while longer for the market to get a good judgment on Snap’s value.”
The IPO process caps a momentous rise for the nearly 6-year-old company founded at Stanford that was dismissed early on as a tool for sending explicit images. It since has grown into a trend-setting chatting and entertainment service, famous for its disappearing messages and whimsical photo- and video-editing tools, used to add things like bunny ears or face swaps to existing images.
Snap’s IPO is the most lucrative in the U.S. since online shopping company Alibaba raised $22 billion in 2014 and the biggest for a tech company since Facebook’s $16 billion haul two years before that.
The stock debut makes Spiegel the youngest chief executive of a company listed on Nasdaq or the NYSE, according to FactSet.