Snap IPO may not be the right one for you

Interest is high, but financial advisers are urging caution

SAN FRANCISCO Money managers have flooded underwriters with requests for shares as Snap prepares to sell stock to the public for the first time. But should the small investor buy Snap on its first day of trading?

Be cautious, financial advisers warn. If individual investors who were not allocated shares in the initial public offering are determined to get a piece of the action, they should put only as much money into Snap as they would be comfortable seeing disappear, much like the messages on the company’s Snapchat service.

Still, interest in the parent of Snapchat ( SNAP) is high on Main Street, according to commission- free trading app Robinhood. It surveyed 6,000 of its customers and found 35% said they would definitely buy Snap and 35% said they might buy Snap, with a minority, 30%, saying they did not plan on investing in the company.

Buying into a high- profile Internet IPO can be an alluring but dicey proposition for momand- pop investors. For every Google there’s a Groupon, and for every Facebook there’s a Twitter. Those divergent paths as publicly traded companies can mean the difference between a good return and a pile of losses.

If a retail investor is going to participate, he or she should do so with a “limit order,” says Lise Buyer, partner with IPO Advisory firm Class V Group.

“That means, each should pick a price that is the most he or she is willing to pay rather than put in an ‘ I will pay anything to own this’ order,” Buyer said. “A limit order helps reduce the risk from the common situation where a stock is being offered on the IPO at $ X price, but right out of the gate shoots up to $ 2X before stabilizing below that level.”

Most retail investors will not be allocated shares at the IPO price, so that uncapped offer can be filled well above the initial price. “It is the ‘ just get me in at any price’ investor who often historically has had subsequent regrets,” she says.

Snap shares priced at $ 17 a share Wednesday after the market closed and are expected to begin trading Thursday.

ROBERT HANASHIRO, USA TODAY If a retail investor is going to participate, he or she should do so with a “limit order,” says one expert.