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Investors Snap To Attention At IPO Prices

Initial Public Offering

And in a Snap, the bated breath can be unbated.  On Wall Street, investors had been awaiting the pricing of the Snap, Inc. initial public offering, as a harbinger of things to come on Thursday’s trading, and perhaps as a harbinger of investor sentiment and appetite for new tech issues in general. 

The outlook — at least at this early writing — would seem to be good.  The firm has priced its offering at $17 a share, and at 200 million shares the implied valuation is $24 billion.  The range that had been floated across the investing community was $14 to $16.  When an offering prices above its would-be range, investors are ready to bid up the price in anticipation that they will at some future date be able to sell higher.  In one additional signal of sanguine intent, the offering was 10 times oversubscribed, per CNBC, implying that people wanted more shares than were allotted.

In the meantime, the enthusiasm is not likely to disappear like one of Snapchat’s disappearing photos.  The debut of the shares, on the New York Stock Exchange under the ticker SNAP, may give the nod for other entrepreneurs to bring their shares to the retail investor. That would help reverse a dearth of IPOs, as 2016 saw less than $19 billion brought to market, down significantly from the $86 billion notched just two years earlier, according to Renaissance Capital. 

Certainly, as a product, Snapchat has an enthusiastic clientele, as ComScore has said that as many as 70 percent of all 18 to 24 year olds in the U.S. use the application.  Despite that embrace, the firm, like so many tech focused brethren (and not just those coming public) has been navigating a sea of red ink.  As noted earlier this month in the firm’s SEC S1 filing, which gave results of operations, the firm’s top line was $404.6 million last year, outpaced by a loss of about $515 million.   As many as 2.5 Snaps appear daily, created by 158 million users globally.

The more than $3 billion the company will raise through the offering will be used for general corporate activities, ranging from acquisitions to beefing up staff.

 

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