The IPO of the Los Angeles company was the most anticipated arrival since Twitter Inc. entered the public market in 2013.
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“The ease of use and features have successfully democratised content creation and allows anyone to direct video narrative, not just repost memes or take photographs with nice filters”.
It’s important to note that it’s still early to forecast Snap’s market failure, and it’s a definite possibility that it could pick up steam again at some point going forward.
Snapchat, which was launched in 2011 by Stanford University students, set itself apart from other social apps by specializing in ephemeral messaging.
The Snapchat parent company went public last Thursday which saw its share price rise by 44% from $17 to $24.48. But resistance from Wall Street’s old guard is beating up the newly public company’s stock. Shares are now trading at 72 times sales, for instance.
Snap’s IPO underwriters had a hard task, Recode reports: They wanted to make sure the IPO price was not too high or too low before it hit the public market, as early investors and founders of the company wanted a fair deal. This is nothing too out of the ordinary for a new technology startup with a unique business model. Grow through partnering. Grow. On average, newly-floated companies are known to underperform when compared to their peers in the three to five years that follow the IPO. Analysts argue that strong competition from Facebook could hurt the company.
Will the company’s strategy be successful and ultimately be able to turn losses into profits?
One of the major reasons why these IPOs typically perform so poorly in their fort year of trading is because of the so-called “lock-up expiration”. “The company needs a roadmap so it can figure out which companies it can buy to get them to their goal”.
The young company saw user growth slow to a halt in the final months of previous year, according to its original IPO filing last month.
Those bullish on Snap stock argue that the company’s future potential lies in the fact that most of its users are under the age of 25.
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” So after the quiet period, they will be releasing their own research in a few weeks”, says Matt Kennedy over at Renaissance Capital. Although I am not an advocate of sequential comparisons, you can see from the chart below, the growth of daily active users is relatively consistent in the social media space, and seasonal factors do not affect it by a margin significant enough to make the comparisons void. “It’s clear that visual media is one of the most important communications mediums today”.
