Rush for shares makes Snapchat founders instant billionaires
Snap Inc shares were up 44% at the end of the company’s first day of trading – giving Snapchat founders an instant pass to join the tech billionaires’ club.
Market Reaction To Snapchat IPO
The success of the initial public offering (IPO) means the US company now has a market value of $33bn, which is three times more than the worth of social media rival Twitter. Snap’s revenues leapt from $58.7m to $404.5 between 2015 and 2016, but the company is still making heavy losses – $514m in 2016 and $373m the year before.
Before Snap went public, the guide price for its shares was $17, but the opening price on Thursday was $24. By the time trading closed the shares were worth $24.48 each. All of the 200 million shares made available for the IPO were taken and the deals amounted to 10% of the New York Stock Exchange’s business for that day.
Evan Spiegel, Snapchat co-founder and CEO, put 16 million of his own shares into the IPO at $17 a share. Spiegel made $272m from the sales, but his worth is valued at $5bn because he kept 210 million shares in his own hands.
Snap Inc Price Chart 5m Timeframe
What Is Snapchat?
Snapchat is a multimedia mobile app that was founded in 2011 by Stanford graduates Spiegel, Bobby Murphy and Reggie Brown. It’s used by 161 million people every day and is best known for limiting the amount of time its users have to view pictures, videos and messages.
In recent years, Snapchat has expanded its software territory and in 2016 it moved into hardware with the launch of camera-enabled sunglasses. In 2013, Facebook founder and CEO Mark Zuckerberg tried to buy Snap for $3bn, but majority shareholders Spiegel and Murphy turned the offer down.
Although Facebook is valued at $395bn, it still considers Snapchat as competition. So, it’s unsurprising that numerous Snapchat features are now on Facebook and the social media giant’s other networks: Instagram and WhatsApp.
Confidence in Spiegel himself is thought to be the main reason for the clamour for Snap shares. However, some investment experts are sceptical about potential for growth and are wary of the company’s year-on-year losses.