You may have read about Snapchat recently in the news, but this time it wasn’t about what new feature was added to the app. Contrary to popular belief, there’s more than just selfies behind the app–the parent company Snap, Inc. might be making it big with its recent IPO. In case stock market lingo is out of your comfort zone, we’ll start with the basics. Now you’ll be able to talk about Snapchat in an intellectual light when an older family member catches you taking selfies.
What’s an IPO?
IPO stands for “initial public offering.” It signifies a company starting to sell shares on the stock market. You may have heard talk about a company “going public.” This is just another term for an IPO–a company allows the public to buy shares in the company and trade those shares on a stock exchange.
Is “Snap” just a hip abbreviation for Snapchat?
Not quite. Snap Inc. is the parent company of Snapchat, that brands itself as a camera company. The company rebranded to “Snap” to include its other products, Spectacles and most recently, Bitmoji, under one name.
So what’s the big deal?
First, Snap is the biggest tech IPO since Alibaba in 2014, so a lot of eyes in the tech investing world are on the company. Snap could perhaps reignite the tech IPO market, and encourage other successful startups like Uber and Airbnb to go public as well.
Snap is also selling stocks that don’t give investors many voting rights, meaning the founders are making the decisions. This is pretty unusual, and could be a reason why investors are skeptical about buying in, when they don’t have much voting power.
Shares were priced at an initial $17 for the IPO but jumped to $24 during its first day of trading, leaving the company valued at approximately $24 billion. The founders–Evan Spiegel and Bobby Murphy–are now billionaires, both under the age of 30. Since its first successful day however, share prices have been fluctuating and are now trading lower.
Snap is a very new company, launched originally in 2011, so investors have little history to look at when deciding whether to buy stock. It is known however that Snap has not yet made a profit, and has had substantial losses in recent years. While the company has a stable user base of a young generation–citing 158 million users per day–it faces a lot of competition from other social media platforms like Facebook and Instagram. Instagram already stole Snapchat’s main feature of disappearing stories, causing Snap to lose some of its supposed loyal supporters.
What does the future look like for Snap?
It’s still early to tell. Some analysts think Snap will end up like Twitter, plummeting after its IPO. On the other hand, a similar story happened with Facebook, which then recovered immensely. Snap has been growing its revenue, but whether this growth will continue and whether the company can make a profit is still unclear.
Will we still be able to use the puppy filter?
Yes. Puppy selfies aren’t going anywhere.