Snapchat’s parent company Snap Inc. will begin trading on the New York Stock Exchange this Thursday at $17 per share. A total of 200 million non-voting shares have been issued at that price, which is higher than what was earlier expected – $14 to $16 per share.
After Twitter went public in 2013, Snap’s IPO is possibly one of the most significant in the realm of technology. Of course, Facebook took all the accolades the year before when it went the IPO route.
Snap’s share price indicates a valuation of about $24 billion, more than twice the $11 current valuation of Twitter. But Twitter’s fortunes are fading, while Snapchat still has a very strong and growing user base. Though that growth has slowed in recent times, Snapchat added more than 40 million users in 2016.
Facebook’s dominance is apparent, but even the social giant is taking pages from Snapchat’s book. For example, they made the mobile camera app the center of focus when people open up Facebook on mobile devices like smartphones and tablets. More recently, they piggybacked on the idea of disappearing messages when they updated WhatsApp.
Snapchat still represents what every social media company wants – access to teenagers and millennials, who will make up the bulk of adults with purchasing power in the future. That’s obviously where the money is, and that’s why everyone is after those demographic segments.
Snap Inc. has transformed itself into a devices company, and will specifically concentrate on video products like Spectacles, which they launched in November, but their conduit for consumers still continues to be Snapchat.
The IPO could see stock price go up significantly, causing the company’s valuation to jump to a higher price to equity multiple. What typically happens in the IPO scenario is that late buyers will have to pay a premium to get in, but will have to hold on to their stock to make any money because the price invariably normalizes after the frenzy is over and done with.
However, what will really happen after the IPO is anyone’s guess. Twitter, for example, is still trading below its IPO price, while Facebook dipped after the IPO but has steadily climbed since then.
Will Snap go through the struggles of Twitter, or will it follow the unerringly profitable path that Facebook has been on in recent years? We don’t know that, but what we do know is that Snap Inc. has just handed itself a massive challenge – to show the world that an image-based communication company with (now) a focus on visual hardware can grow and be profitable for years to come.
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