Snap rockets higher in Wall Street debut
The company behind Snapchat is trading sharply higher in its Wall Street debut, proof, at least for a day, that there's investor demand for young but still unproven tech companies.
Shares of Snap Inc jumped US$8.21, or 48 per cent, to US$25.21 a share in afternoon trading on Thursday.
The company had priced its initial public offering of 200 million shares at US$17 each on Wednesday. That was above the expected range of US$14 to US$16.
Snap's IPO was one of the most anticipated for a technology company since Twitter's in 2013. That, in turn, had created the biggest stir since Facebook made its debut on Wall Street in 2012. Twitter is now valued at US$11 billion, while Facebook is US$395 billion. Snap's pricing valued the Los Angeles company at US$24 billion.
Snapchat is best known for disappearing messages. It is popular with young people, but growth has slowed in recent months. That has investors wondering whether the company will end up more like Twitter, with its troubles attracting users and declining stock price, or Facebook, with soaring user numbers and stock price.
Thursday's surge on Wall Street shows that there is initial investor excitement about Snap, but it's not guaranteed to last. Twitter, for one, soared initially after its IPO, but now trades 39 per cent below its IPO price. Facebook, meanwhile, struggled initially but has since more than tripled its IPO price.
Snapchat started 2017 with 158 million daily active users, most of whom are people in their teens, 20s and early 30s. But many of them are finding Snapchat harder to fit in with daily life.
Growth slowed to a crawl since Facebook's Instagram cloned Snapchat's "stories" in August. With the feature, photos and videos shared by users play in a loop for 24 hours, then disappear. The feature helped Snapchat recover from stagnant growth before, but now it's no longer unique to Snapchat. After adding 36 million daily active users during the first half of last year, Snapchat picked up just 15 million in the second half.
The number of people downloading Instagram's app has been accelerating during the past six months, suggesting a gradual shift away from the Snapchat app, based on an analysis financial advice site ValuePenguin did of activity in Apple's app store.
Snapchat is more about image-based communication, said Chi-Hua Chien, managing partner at Goodwater Capital who originated the VC firm Accel Partners' investment in Facebook and later invested in Twitter while at another firm.
Open the app, and you open a camera. Turn the camera to selfie mode, and you get a bunch of filters to overlay on your face. Because the images you send eventually disappear, there's less pressure to put forward your best self.
Strong on its own
Snapchat has often drawn comparisons to both Twitter, which also faces stagnant growth, and Facebook, whose users are highly engaged, just like Snapchat's. Ultimately, Snap doesn't have to be like either to succeed and can forge its own path and identity.
LaVon Murphy, 45, a photographer in Portland, Oregon, uses Facebook to keep up with friends, Instagram to express herself through pictures and Twitter to keep up with the news. She added Snapchat recently to stay in touch with her 17-year-old son.
"I don't really understand why he and his friends use the app so extensively, but I am trying to keep up," she said. "It allows me to be silly and show a silly side of myself to my son and it allows him to be silly with me."
Snap just needs millions more like Murphy willing to make time for yet another social network.
- AP reports