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Businesses Media Social Networks The Almighty Buck

Instant Messaging App Snapchat-Maker Snap's IPO Opened Trading At $24 a Share, Making the Company Worth $33 Billion (recode.net) 66

Posted by msmash from the how-they-think dept.
Snap, the company behind instant messaging app Snapchat, went public this morning at price that values the loss-making tech company at $33 billion. Here's how the investors are valuing the company: At $33 billion, investors are saying Snap is worth 35 times what it's estimated to generate in sales this year, or about $936 million, according to eMarketer. Compare that with Facebook, which is currently worth about 10.5 times its estimated 2017 revenue. In other words, investors, for the moment, think Snap has three times more potential value than Facebook. That's a big bet. Snap lost $514 million last year on $404 million in revenue. Compare that with Twitter, which lost $79 million the year before its IPO, while Facebook made $1 billion in profit. Snap has 158 million daily active users. Facebook at its IPO had 845 million monthly active users and 483 million daily active users.
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Instant Messaging App Snapchat-Maker Snap's IPO Opened Trading At $24 a Share, Making the Company Worth $33 Billion More

Instant Messaging App Snapchat-Maker Snap's IPO Opened Trading At $24 a Share, Making the Company Worth $33 Billion

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  • I really wonder sometimes.. (Score:1)

    by Anonymous Coward

    Where these investors get their understanding of technology.

    • They understand that they set the price of what they're trading. They're thinking they're rich, so they are.

      • Re: (Score:2)

        by gnick ( 1211984 )

        They understand that they set the price of what they're trading. They're thinking they're rich, so they are.

        They're setting today's price of what they're trading. They're thinking they're rich, so they feel that way. Today, they can trade their shares for today's price. No longer the case once this particular bubble ceases to be a bubble.

        • If they can sell all their shares today for that price, they'll have made themselves rich by setting the price themselves.

          • Re: (Score:2)

            by torkus ( 1133985 )

            They can't.

            For one, they'd dilute (or dissolve) their voting block.

            Two, there's two people who still have the large majority of shares. If they dumped them on the market en masse the stock price would tumble in a heartbeat.

            Three, a CEO (and founder and majority stakeholder) is expected to hold much of their stock - especially in the short term - otherwise investors will bail too...and stock tumbles once again.

            Also, there would almost certainly be SEC investigations into fraud and insider trading. You don'

            • It looks like the company pushed pretty hard for a lock-up period for IPO investors. Whenever a company goes public, most pre-IPO shareholders are subject to a lockup period. http://fortune.com/2017/02/28/... [fortune.com] So the number of shares available for trading is much lower than the actual float. Also many (if not all) book-runners require their buyers to hold for 60 days. So there just aren't very many shares to trade after an IPO. The price goes up for a paper-gain but doesn't represent a consensus valuat

    • Re:I really wonder sometimes.. (Score:5, Insightful)

      by JaredOfEuropa ( 526365 ) on Thursday March 02, 2017 @03:22PM (#53965071) Journal
      Social media operators are not technology companies. They are advertising agencies and marketing data processors. Your understanding of technology is not going to help you assess the worth of these companies or the risk of investing in them.

  • Thirty-Three Billion (Score:3)

    by sexconker ( 1179573 ) on Thursday March 02, 2017 @02:32PM (#53964595)

    As Megatron said to Optimus Prime as he shot him repeatedly (and fatally) while using Hot Rod as a shield: "FALL! FALL!"

    The smart money will short this shit into the ground. Snapchat has fewer opportunities to generate revenue than fucking Twitter does.

    • I'd short it if I had any idea when the bubble would burst. You need to time it just right, and I'm just not good at predicting when wall street will come to their senses on these sorts of tech bubble stocks.

      • Re: (Score:3, Informative)

        by misxn ( 901438 )

        I'd short it if I had any idea when the bubble would burst. You need to time it just right, and I'm just not good at predicting when wall street will come to their senses on these sorts of tech bubble stocks.

        Just buy some long term PUTS and you'll be fine. No need to predict much there. Just sit and wait. (don't use margin)

        • From what I can tell, there are no SNAP puts trading yet. I've often looked at buying puts on companies but rarely ever actually purchased. You usually can't buy puts more than six months in the future and you will pay dearly for them. Often the stock goes down but you still lose because it doesn't go down enough to cover the premium you pay for the put. You can use some long-term rolling strategies but these are very high risk. And the company will work against you. They will release abysmal earnings

        • Re: (Score:1)

          by Anonymous Coward

          Short positions are damn near impossible for the retail investor to take against new IPOs. The CBOE typically does not start listing option contracts until 60 consecutive trading days have elapsed and obtaining share lends for short selling on IPOs are all but non-existant if you don't already have an inside track on them. Really the only people that make money selling shares of new IPOs in any capacity are the underwriters and insiders already holding onto convertible notes predating the IPO (company direc

          • I think that the period for options listing is five trading days not sixty. So it may be possible to buy puts well before the lockup-period ends. But I agree with you generally. Short-positions are near impossible for retail investors even on non-IPO shares. http://www.theoptionsguide.com... [theoptionsguide.com]

      • when wall street will come to their senses on these sorts of tech bubble stocks

        - they are well within their senses.

        The problem is that they have no yield in anything else, so they are searching for yield. The yield is gone however, that's because the government destroyed it, annihilated it completely. That's because the government needs cheap borrowing, if the interest rates were anywhere near their historical normals, the USA government couldn't continue to exist even if it had to pay that type of interest (never mind paying back the actual principal)

        The government together with t

        • My comment has to do with the perception that there is a lot of emotional trading going on.

          • Sure, and it will continue as long as the banks are bailed out in case of failure, so under those conditions it only makes sense to trade on emotion and to gamble as much as possible. It's heads I win, tails you lose scenario, so wall street is not off their rocker, they are quite rational.

    • If you had short it at the IPO price of $17, you would have lost your shirt worse than the The Duke brothers in Trading Places.

      • Uh, they traded commodities and got illegally scammed (flipping their own scam against them, yes).

        Why would you short at $17? The shitty web 3.0 IPOs hit peak mindshare on day 1, not day 0. The people not in on the con have to wait until day 1 to initiate their trades. Only the big boys get their shit in in advance. Everyone else buys in after ASAP in the mad scramble. The bubble bursts when the big boys want to cash out or when everyone else gets tried of yet another quarter of no profit, no growth, an

  • I'm just not stupid enough to be able to see why this, like Facebook, could possibly be profitable. So, I'll lose out on this one, too.

    • because selfie.

    • I'm just not stupid enough to be able to see why this, like Facebook, could possibly be profitable. So, I'll lose out on this one, too.

      Snap inc. don't know either. They didn't even make a secret of it. [petapixel.com]

      I don't understand why anybody would bother investing in this, but I'm going to assume that a huge investment bank will make a huge profit, so that's probably the reason.

  • Back during the first bubble, particularly around the time that Redhat went public, I was fascinated at how many IPOs were priced in the $15 to $30/share range regardless of what that implied about their total value.

    These folks have figured out how to game the uninformed investor looking to make a quick buck on IPOs. $5 makes people think the company is a dog, $50 to $100 makes them think it's overpriced. The fact that neither number says anything about valuation is immaterial.

    So sure, $24 looks like a g

    • Re: (Score:2)

      by shess ( 31691 )

      Back during the first bubble, particularly around the time that Redhat went public, I was fascinated at how many IPOs were priced in the $15 to $30/share range regardless of what that implied about their total value.

      These folks have figured out how to game the uninformed investor looking to make a quick buck on IPOs. $5 makes people think the company is a dog, $50 to $100 makes them think it's overpriced. The fact that neither number says anything about valuation is immaterial.

      So sure, $24 looks like a great price for a piece of stock, who cares if it implies a grossly overvalued stock.

      I'm not sure where you're going, here. If people are more comfortable buying a $15 stock than a $150 or $1500 stock, regardless of the share multiplier, then the industry is going to figure that out and target it. They aren't "gaming" the uninformed investor, if the uninformed investor is out there throwing money at random stuff, it is not the job of investment banks to step aside and avoid that money.

      My experience with tech IPOs is that there are probably a bunch of brokerages who finagled "friends and f

  • Investment strategies of 20 years ago... (Score:1)

    by Anonymous Coward

    These guys are all "oh man, this product is in millions of peoples hands! The potential! The exposure!" while failing to take into account that people use it because it's free (path of least resistance), and the second you start trying to charge/disrupt the experience with ads... MANY of them will look elsewhere

    • Potential for growth is very important when valuating a stock, regardless of how long ago the IPO was.

  • Could be another Twitter or even worse (Score:5, Insightful)

    by Zontar_Thing_From_Ve ( 949321 ) on Thursday March 02, 2017 @03:28PM (#53965121)
    Twitter is currently trading within two dollars of its 52 week low as concerns mount that it may not ever be profitable. I don't use Snapchat. I have nothing against it, but I have no use for it. I have read recently that all of their competitors do everything that Snapchat does, but they all do it better. Snapchat was just there first. I'm sure that some people will make money on this stock. Those who got in close to the IPO opening price may have already sold it off for a profit. The investment bank that backed the IPO certainly has already made a ton from today's market action. But this is the same market with the same investors who kept SCO alive for years at almost $5 a share in the hopes that it would win its lawsuit so I won't be surprised if Snapchat eventually dies and many of those investors end up taking big losses on it.

  • Can't believe we're repeating the dotcom bubble (Score:3)

    by ErichTheRed ( 39327 ) on Thursday March 02, 2017 @03:43PM (#53965239)

    Back in Dotcom Bubble 1.0 it was "eyeballs" - now it's "engagement". Companies IPOing back then also had no concrete plan on how they were going to make money. This is reminding me of the second phase of the last bubble. First it was VC firms pumping money into anything that involved a web browser, then trying to recover their investments by pumping the companies out to an unsuspecting public. Facebook and Twitter were the first, Snapchat might be a VA Linux or a TheGlobe.com.

    The thing that sucks is all the bankruptcy sales won't have any cool servers, storage or network gear since it's all in The Cloud this time around.

  • Imagine what their company could be worth if their software had a good UI? ;)

  • Is how would we act if we found alien life (non-intelligent) and could send a ship to study it, would we allow the ship back? Or would we have a permanent physical contact ban in case of deadly life forms that our species couldn't cope with.

  • Let's party like its 1999...again (Score:4, Insightful)

    by Tangential ( 266113 ) on Thursday March 02, 2017 @04:28PM (#53965635) Homepage
    This is crazy. They are losing money and they have no clear runway to working business model. Its like a flashback to 20 years ago. Apparently a whole new generation of investors has to learn all of these lessons for themselves.

    • I went to a night club about a 1 year ago since about 7 years and 80% of the people in there were wearing tight cut off jeans and florescent tshirt and shit that looked liked I was back in high school in the early 90's. New generation just recycle the same shit although I wont mind when those womens low cut jeans come back instead of the current mom bum 90's look.

  • You value a normal company on its projected profits, not its revenue.

    You can have a trillion dollars in revenue, but if you're still making a loss your company is worthless.

    But different rules seem to apply to Tech stocks.

    • When a business is a growth company, revenue valuations are reasonable. If the plan is to use all of the profits to grow the company, the profit will always be zero. This is a reasonable strategy. It certainly worked for Amazon. When buying zero-profit companies, you have to decide whether they are actually going to turn into a profitable business. I don't see much hope for SNAP.

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