IPO = Initial public offering. Snap offered their shares of stock to the public at $17 per share to raise money for expansion. “To the public” means you can buy the stock now. Before the IPO the stock was privately owned internally as well as by venture capitalists. There were also a few other lucky ones like this high school that made more than $20 million from a $15,000 investment. Wow. Free jump ropes for everyone.
The stock rallied more than 40% when it began trading.
This is great, but a lot of stocks do “pop” on their IPO day. Today, the stock is down nearly 7%.
Snap generates revenues but they’re not profitable (expenses > revenues).
Some say Snap went public too early, given they haven’t generated profits and user growth has slowed.
Lunatics: it makes complete sense for them to go public.
- We’re not in a recession (economic growth is ok, which is a better environment for an IPO than a recession)…
- The stock market seems to like President Trump so far…
- Generally speaking, nobody really knows why their stocks keep going up, but they do, so people keep buying.
If I were the CEO I’d have gone public too. What a great time to be alive!
No profits and slowing user-growth are not a concern for a startup that 1) has investors they want to pay back and make rich and 2) needs more money (now from the public) for expansion. Sorry.
If you’re thinking about shorting the stock because your Twitter (TWTR) bio says something like “influencer of shorting stocks” followed by a list of all the publications you contribute to, please just keep in mind that Snap will likely be added to index funds, probably in 2018.
That demand could cause the stock to rally and that could cause you to have egg on your face if you get the timing wrong. Peace and love to you and good luck…
Originally published in the Ms. Cheat Sheet newsletter. See more from Kathryn Cicoletti at Ms. Cheat Sheet here.
