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What you need to know about Snap’s IPO

Snap Inc. debuted on the New York Stock Exchange last week with its initial public offering to much buzz from investors and the media alike. Snap is the Los Angeles-based owner of Snapchat (the app known for its disappearing messages) and maker of Spectacles (video-camera glasses).

Here’s what you need to know about Snap’s IPO:

1. Snap’s was the biggest U.S. tech IPO since Alibaba in 2014

As the hottest technology stock offering in three years, Snap Inc.’s shares ended up 44 percent on their first day of trading, giving the company a market value of $28.3 billion. The offering was well timed, with investors clamoring for fresh opportunities after 2016 marked the slowest year for tech IPOs since 2008.

Software IPOs from 1996 - 2016, from Reuters Graphics.

2. Some say the excitement around Snap’s IPO is overblown

As Rob Cox, Breakingviews Global Editor, wrote hours after the opening bell on the morning of Snap’s IPO:

“Investors have effectively just done what no self-respecting person ever should: wear sweatpants in public. With Snap’s $3.4 billion initial public offering they have simply given up giving a damn. They handed their money over to an immature company and in the process abrogated their rights to fair treatment, good governance and reasonable valuations. If the $24 billion self-styled “camera company” run by a 26-year-old fails to achieve its ambitions, shareholders have only their capitulated selves to blame.”

Overvaluation of course is nothing new with tech IPOs, but everyone will be watching Snap closely in the coming months. According to an article in Barron’s, Snap is valued at about 34 times its projected 2017 revenue of $1 billion, based on its enterprise value, while Facebook is valued at 10 times sales.

3. Investors see Snap as “too big to fail”

Snap’s IPO was a must-have for money managers, despite concerns about the company’s strategy and slowing user growth.

And, to ensure a successful market launch, Snap’s bankers deployed a common tactic on big tech IPOs: they limited supply. Snap offered only 15 percent of the company to investors.

4. There’s concern over Snap’s non-voting shares

As Reuters exclusively reported on the eve of the big IPO last week:

“The IPO shares will give investors no voting rights, an unprecedented feature that has raised concerns among corporate governance leaders that other high-valuation companies may follow suit and leave investors with little say over company operations.”

This has prompted an SEC advisory committee to review the decision, and one group representing large institutional investors has approached index providers S&P Dow Jones Indices and MSCI Inc, looking to bar Snap.

5. Investors and analysts will be watching Snap closely

For all of the reasons mentioned above, Snap will continue to be watched closely by anyone who cares about tech and media. Comcast’s NBCUniversal has invested $500 million in the company as part of the initial public offering, its latest move aimed at driving digital growth, and a signal of old media mixing with new.

Though Snap bills itself as a camera company, onlookers will continue to compare its trajectory to other social media IPOs, like Facebook and Twitter. The chart below gives a snapshot of Snap’s numbers compared to its peers.

Snap Inc vs Facebook and twitter by the numbers.


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$SNAP trading on Thomson Reuters Eikon

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