Risks In The Fine Print For Snapchat IPO?

Snapshot: Snap opened at $24 this morning and at this writing is changing hands at $25.

Amid all the talk about whether this marks a resurgence, or resurrection, in tech IPO land, it bears noting that risk is always in the detail. And as The Washington Post reports, some details of that risk are in the IPO filing that set off the frenzy in the first place headed into today’s effervescent opening.

When a stock ramps up 50 percent in a day, even on a euphoric first day of trading, some mindfulness of what might truncate that euphoria should be embraced. The Post reported that Snap, the parent company of Snapchat, has some of the usual caveats in place, ranging from user growth slowdowns to the vagaries of dealing with hackers.

But beyond that, some other notables came from the filing. The first disclosure is that voting rights are structured a bit differently than might be seen with other firms. The buyers of the shares that were brought to market Thursday (Mar. 2) will actually get no voting rights, and that means, ostensibly, that they will get no say in the direction of the company. That might not be top of mind for retail investors. But for institutional investors, who might want to agitate for changes in corporate strategy later should they perceive that the company could be run more efficiently (and yes, that is an if), that might be a concern.

One other mention in the filing, as the Post noted, is that there is no “designated” headquarters for the company, which may have a negative impact on employee morale, as they might not commingle across dispersed locations and it might be hard to “adequately oversee” business processes. The tradeoff here, perhaps, is secrecy versus oversight.

But the Post also stated that the somewhat far-flung notion of the Snap campus, across several locations, could play nicely into and foster the startup culture that is so beloved by entrepreneurs and innovators. Mingling with locals (read: non-Snap workers) can help foster insight into how Snap can be improved or give rise to other products.


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