Snap’s stock debut makes history
On Thursday morning, 26-year-old Snap chief executive Evan Spiegel and 28-year-old chief technology officer Bobby Murphy swapped their beachside V-neck T-shirts for dark suits and gold and blue ties.
Standing before a sea of stock traders, the pair rang the opening bell at the New York Stock Exchange, marking the biggest initial public offering ever for a Los Angeles company, a milestone that places the Venice firm among the heavyweights of the technology world.
"How do we feel?" an exhausted, tieless Spiegel said after the company made its Wall Street debut. "We were just thinking about how do we answer that question. It's exciting."
After pricing shares at $17 apiece to raise $3.4 billion, Snap saw its stock leap 44 percent to $24 when it began trading under the ticker symbol SNAP around 8:15 a.m. Pacific time. n. Demand for shares has been 10 times the supply despite questions about whether the popular photo and video messaging app will be able to fend off competitors like Facebook and continue to grow.
Thursday caps a momentous rise for the nearly 6-year-old company that has grown into a trend-setting chatting and entertainment service, famous for its disappearing messages and whimsical photo- and video-editing tools, used to swap faces or add bunny ears.
The company now has around 2,000 employees and a sprawling beachside presence. It has quickly helped establish Los Angeles as a vibrant tech hub.
The stock debut makes Spiegel the youngest chief executive of a company listed on Nasdaq or the NYSE, according to FactSet.
The IPO -- the most lucrative in the U.S. since Alibaba raised $22 billion in 2014 -- is also expected to mint hundreds
of new millionaires, as employees begin cashing out stock grants earned as part of their compensation.
Financial 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."
The infusion of cash will allow Snap to expand, solidify its reputation and pay its investors, who funded the company's rise. But the IPO milestone also means the company will be under additional financial scrutiny. Snap became the first company to sell IPO shares that lack voting power -- a move that frustrated investors and has drawn the attention of regulatory advisors.
The company must also prove that it can make money and keep attracting new users.
Snap generated $404.5 million in revenue in 2016, mostly from ad sales, but operated at a $514.6-million loss. In regulatory filings, the company revealed its once feverish user growth has slowed, meaning its financial performance "will increasingly depend on our ability to elevate user engagement or increase our monetization of users."
While it's not unusual for an unprofitable company to go public, it remains to be seen whether Snap will take after Facebook, which last year made more than $10 billion in profit and now has more than 1.8 billion monthly active users, or Twitter, which continues to operate at a loss and has struggled with getting new people to use its platform.