Snap, the parent company
Messaging app soars to $28B value on market debut
of the messaging service Snapchat, exceeds expectations for its stock-market debut, closing at a value of approximately $28 billion.
Snap, the parent company of the messaging service Snapchat, outstripped expectations for its stock market debut Thursday, closing at $24.48 per share for a value of approximately $28 billion.
The IPO was a massive success for co-founders Evan Spiegel and Bobby Murphy, who founded the company in 2011 out of their Stanford University dorm rooms. Now both are billionaires before age 30.
The company saw a healthy pop in its first moments of trading, opening at $24 — roughly 40 percent higher than the company’s price of $17 per share, and far higher than the company’s original $14-$16 range.
The steady trading at the higher price showed the great demand for Snap’s initial public offering. Some are hoping that Snap’s debut can revive a lagging IPO market, as Barron’s reported, and encourage other tech firms to make their debuts.
Snapchat, Snap’s main service, has a loyal user base of 158 million people who use the app to send 2.5 billion messages every day, according to its initial public offering filing. While it has yet to profit off that popularity, it is growing its revenue, which was $404.5 million in 2016. The firm has invested substantially in working with media partners, including The Washington Post, to deliver news and analysis to its predominantly young audience.
The company’s growth has been largely driven by younger users, who spend over 30 minutes on it per day, according to the company’s filing.
Snapchat’s growth, however, is being driven more and more by older users, according to the research firm eMarketer. The firm projects that 6.4 percent of Snapchat’s users this year will be between 45 and 54, showing that its expanding its appeal among older users, even as fewer younger users join the network.
But some analysts still caution that Snap has to prove itself. James Gellert, chief executive of the analysis firm Rapid Ratings, expected Snap to crackle with a post-IPO pop, thanks to techfocused investors hungry to get their hands on something new. But, he said, Snap has a way to go to prove itself as a stable investment.
“Snap is relatively young, and it’s yet to generate profits. The typical IPO tech investor will say that’s fine and it doesn’t matter,” he said. But from a long-term perspective, Gellert said, an ability to generate profit and to make money on assets are key for a company’s financial health.
Gellert said Snap is in a weaker position at this point in its development than Facebook, which has had considerable post-IPO success. He said it has more in common with Twitter, which has struggled since going public.
His suggestion is that Snap look at Twitter and Facebook to understand the challenges it will face as a social network with the responsibilities of a public company.
“Snap has a chance to look at the good and the bad, the positive and negative choices of companies that come before them,” Gellert said.